I 


LIBRARY   OF 

ALLEN  KNIGHT 

CERTIFIED  PUBLIC  ACCOUNTANT 
502  California  Street 

SAN     FRANCISCO.     CALIFORNIA 


i 


GIFT  OF 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/commerciallawOOtipsrich 


COMMERCIAL  LAW 


BY 


FREDERICK  S.  TIPSON,  C.  P.  A., 

Fellow  of  the  American  Association 
of  Tuhlic  Accountants 


PUBLISHED   BY 

FREDERICK    S.     TIPSON 
150  Nassau  St.,  New;  Ypftx  \  \  \ 


\^"- 


Copyright,  1903,  by 
F.  S.  TIPSON. 


(^  (^Oido^X^w.^^ 


»  »  :>  «  'V  »    « 


preface^ 

This  volume  contains  all  questions  set  in  the  Commer- 
cial Law  paper  at  the  New  York  State  semi-annual 
examinations  for  certified  public  accountants,  from  De- 
cember 1896  (the  date  of  the  first  examination  held),  to 
June  1902,  with  full  answers  and  explanations  in  plain, 
and,  as  far  as  possible,  non-technical  language.  It  will 
be  noticed  that  many  answers  given  here  are  quite  differ- 
ent to  those  which  would  have  been  correct  at  the  time 
the  earlier  papers  were  set;  this  appUes  particularly  to 
the  Corporation  Law  and  the  United  States  Bankruptcy 
Law  of  1898;  the  numerous  modifications  of  the  former 
in  New  York  State,  and  the  enactment  of  the  latter  having 
effected  basic  alterations  of  great  import. 

It  would  really  seem  now  as  though  the  old  legal  motto, 
"Stare  decisis  et  non  quieta  movere"  (To  stand  by  deci- 
sions and  not  to  disturb  what  has  been  settled)  had  been 
allowed  to  a  considerable  extent  to  fall  into  desuetude, 
so  numerous  are  the  apparently  conflicting  legal  decisions 
rendered  from  day  to  day.  The  consequences  have  not 
been  particularly  happy. 

It  has  been  decided  that  where  a  broker  hypothecates 
his  customers'  securities  he  may  do  so,  "provided  he  keeps 
securities  of  a  like  description  and  amount  under  his  own 
control."  "Under  his  control"  has  been  decided  as  "keep- 
ing in  his  own  possession."  The  question  would  naturally 
arise,  how  is  business  done  in  Wall  Street?  and  what  is 

380282 


the  advantage  to  the  broker  of  re-pledging  his  dient's 
securities  ? 

Another  astonishing  decision  on  record  is  that  inspectors 
of  election  have  not  the  power  to  determine  the  genuine- 
ness of  proxies !    What  are  they  then  appointed  for  ? 

The  attention  of  the  student  is  particularly  drawn  to  the 
terms  "good''  and  "valuable"  consideration.  In  the  case 
of  deposit,  and  commission  or  mandate  bailments,  where 
the  bailee  acts  "without  reward/'  unless  the  difference 
is  accurately  appreciated  the  question  would  not  unnatur- 
ally arise  "how,  then,  can  a  bailment  be  a  contract?" 
The  very  gratifying  success  that  the  author's  Theory 
of  Accounts  has  met  with  has  led  him  to  believe  that  in 
publishing  these  text-books  he  is  supplying  an  acknow- 
ledged and  very  decided  want. 

The  following  books  have  been  consulted  by  the 
writer  in  the  preparation  of  this  manual;  and  to  their 
authors,  as  well  as  to  numerous  friends  in  the  accountancy 
profession  who  have  favored  him  with  valuable  sugges- 
tions, he  tenders  hearty  thanks : 

White's  Manual  for  Business  Corporations. 

Essentials  of  Business  Law. — Burdick. 

The  Care  of  Estates. — Hill. 

Accountants'  Guide. — Gottsberger. 

Law  Dictionary. — Bouvier. 

The  New  Commercial  Law. — American  Book  Co. 

Encyclopedia  of  Accounting. — G^.  Lisle,  C.  A. 

Encyclopedia  of  Law  Forms. — Spalding. 

Frederick  S.  Tipson. 
September  15,  1903. 


December  1896* 

I.  Draw  the  following  promissory  notes  and  forms  of 
indorsement : 

NOTES. 

(a)  Not  negotiable;  maker,  John  Brown;  payee,  Wal- 
ter Jones ;  amount,  $1,000.25  ;  time,  four  months ;  place  of 
payment,  Bank  of  America. 

(b)  Negotiable;  maker,  payee,  amount,  time  and  place 
of  payment  as  in  a. 

(c)  Negotiable;  requiring  no  indorsement. 

INDORSEMENTS. 

(d)  Indorsement  by  above  payee,  in  blank. 

(e)  Indorsement  by  above  payee,  to  Robinson  &  Co. 
in  full  and  further  negotiable. 

(/)  Indorsement  by  Robinson  &  Co.,  relieving  them 
from  further  liability. 

(g)  Indorsement  by  Robinson  &  Co.,  to  Henry  Miller, 
not  further  negotiable. 

(a)  Albany,  December  15,  1902. 

Four  months  after  date  I  promise  to  pay  to  Walter 
Jones  One  thousand  ^Y^^^  Dollars  at  the  Bank  of  Amer- 
ica.   Value  received. 
$1,000.25.  John  Brown. 

(b)  Albany,  December  15,  1902. 
Four  months  after  date  I  promise  to  pay  to  the  order 

of  Walter  Jones  One  thousand    ^s/^^^    Dollars,   at  the 

Bank  of  America.    Value  received. 

$1,000.25.  John  Brown. 

(c)  Albany,  December  15,  1902. 
Four  months  after  date  I  promise  to  pay  to  Walter 


Jones  or  bearer  One  thousand  ^'/loo  Dollars,  at  the  Bank 

of  America.    Value  received. 

$1,000.25.  John  Brown. 

(d)  Walter  Jones. 

(e)  Pay  to  the  order  of  Robinson  &  Co., 

Walter  Jones. 
(/)     Without  recourse. 

Robinson  &  Co. 
(g)     Pay  to  Henry  Miller. 

Robinson  &  Co. 


2.  When  an  indorsed  promissory  note  is  not  paid  at 
maturity. 

(a)  What  course  should  the  holder  pursue  in  order  to 
prove  presentation? 

(b)  Against  whom  can  the  holder  bring  suit  for  re- 
covery ? 

(c)  Against  whom  can  an  indorser  who  has  been  com- 
pelled to  pay  this  dishonored  note  bring  suit  for  recovery  ? 

(d)  Under  what  circumstances  is  an  indorser  relieved 
from  liability? 

(e)  How  may  the  holder  be  relieved  from  the  neces- 
sity of  protesting  it  for  non-payment? 

(/)  What  are  the  principal  defenses  that  may  be  urged 
by  the  maker  of  a  note  in  an  action  for  non-payment  ? 

(g)  What  defense  (good  as  against  the  payee  or  in- 
dorser who  has  knowledge  thereof)  will  not  relieve  the 
maker  from  liability  to  a  subsequent  purchaser  in  good 
faith  before  maturity? 

(h)  How  is  the  liability  of  indorsers  affected  by  an 
agreement  between  the  holder  and  the  maker  of  the  note 
to  extend  time  of  payment  beyond  maturity? 

(a)  He  should  have  the  note  protested  by  a  notary 
public,  and  send  immediately  to  the  maker  and  to  each 


indorser  a  copy  of  the  certificate  of  protest,  and  a  notice  of 
non-payment,  with  a  description  of  the  note. 

(b)  Against  the  maker  or  any  endorser  of  the  note  to 
whom  proper  notice  has  been  sent.  Indorsers  "without 
recourse"  are  of  course  excepted. 

(c)  Against  the  maker  or  any  prior  indorser  to  whom 
proper  notice  of  non-payment  has  been  sent. 

(d)  By  indorsing  "without  recourse" ;  by  not  receiving 
proper  notice  of  non-payment;  by  an  agreement  between 
holder  and  maker  to  extend  the  time  of  payment. 

(e)  By  the  words  "no  protest"  or  "protest  waived" 
appearing  on  the  note. 

(/)   Infancy,  usury,  alteration,  forgery,  want  of  con- 
sideration, and  fraud  or  compulsion. 
(g)  Want  of  consideration. 
(h)  They  are  relieved  from  liability. 


3.  Draw  the  following  bills  of  exchange  and  forms  of 
indorsement  and  acceptance: 

DOMESTIC  BILL. 

(a)  Drawer,  Sm.ith  &  Jones,  Boston;  drawee.  Brown 
&  Robinson,  New  York;  amount,  $500.50;  payee,  Edward 
Hunt,  New  York;  time,  10  days  sight. 

(b)  Indorsement  by  payee  in  blank. 

(c)  Acceptance  by  drawee,  payable  at  Bank  of  New 
York. 

FOREIGN    BILL. 

(d)  Drawer,  J.  M.  Wilson,  Son  &  Co.,  London; 
drawee,  Flint,  Heddy  &  Co.,  New  York;  amount, 
$9,000.50;  time,  60  days  date. 

(e)  Indorsement  by  payee  to in  full. 

(/)   Form  of  drawee's  acceptance. 


8 

$500.50.  Boston,  Mass.,  Dec.  24,  1902. 

(a)  At  ten  days'  sight  pay  to  the  order  of  Edward 
Hunt  Five  Hundred  ^^/^qq  Dollars  and  charge  to  account 
of  Smith  &  Jones. 
To  Brown  &  Robinson, 

New  York. 

(b)  Edward  Hunt. 

(c)  Accepted,  December  26th,  1902. 

Payable  at  Bank  of  New  York. 

Brown  &  Robinson. 

(d)  London,  December  10,  1902. 
$9,000.50. 

Sixty  days  after  date  of  this  first  of  exchange  (second 
and  third  of  same  date  and  tenor  unpaid)  pay  to  the  order 
of  Bartlett  &  Co.,  of  Boston,  Nine  Thousand  ^^/loo  Dollars 
and  charge  the  same  to  the  acount  of 

J.  M.  Wilson,  Son,  &  Co. 
To  Flint,  Heddy  &  Co., 
New  York,  U.  S.  A. 

(e)  Pay  to  the  order  of 

Bartlett  &  Co. 
(/)  Accepted,  December  27,  1902, 

Flint,  Heddy  &  Co. 

4.  If  the  drawee  of  a  draft  or  bill  of  exchange  refuses 
to  accept  the  same  on  presentation: 

(a)  How  is  the  due  date  of  the  draft,  or  bill  aflfected? 

(b)  In  what  manner  if  any  is  he  liable  under  the  draft, 
or  bill,  if  he  has  funds  of  the  drawer  or  is  indebted  to  the 
drawer  ? 

(c)  On  what  grounds  can  the  holder  commence  action? 


(d)  How  can  a  third  party  prevent  the  bill  from  be- 
coming due  at  once,  and  what  would  be  his  position  if 
obliged  to  pay  the  bill? 

(a)  It  becomes  due  at  once,  and  the  holder  can  demand 
payment  of  the  drawer  forthwith. 

(b)  The  drawee  is  not  liable  to  the  holder  until  he  has 
accepted  it,  nor  can  he  be  sued  by  him  for  refusing  to 
accept.  The  drawee,  however,  is  liable  to  the  drawer  if 
he  has  funds  of  the  drawer  in  his  possession  and  refuses 
to  accept.  He  may  be  sued  by  the  drawer  for  damages 
sustained  by  reason  of  his  non-acceptance. 

5.  What  is  a  corporation,  and  how  does  it  differ  from  a 
joint-stock  company? 

A  corporation  is  an  artificial  person  created  by  law  to 
transact  such  business  as  may  be  set  forth  in  its  articles 
of  incorporation.  It  has  the  right  of  succession  or  con- 
tinuance, regardless  of  change  in  its  membership.  A  joint 
stock  company,  while  similar  to  a  corporation  in  form, 
and  as  to  its  method  of  transacting  business,  is  more  in 
the  nature  of  partnership  as  regards  the  individual  liability 
of  its  share-holders. 

6.  Describe  briefly  the  following: 

(a)  A  sole  corporation. 

(b)  A  corporation  aggregate. 

(c)  An  eleemosynary  corporation. 

(d)  A  public  corporation. 

(e)  A  private  corporation. 

(a)  A  sole  corporation  is  a  single  individual  possessed 
of  corporate  powers.     Such  corporations  do  not  exist  in 


lO 

the  United  States  of  America.    Examples  in  England  are 
the  sovereign,  and  bishops  of  the  established  church. 

(b)  A  corporation  aggregate  is  a  collection  of  individ- 
uals united  in  one  body.  It  is  an  artificial  person,  but 
capable  of  transacting  such  business  as  it  may  be  entitled 
to  the  same  as  a  natural  person. 

(c)  An  eleemosynary  corporation  is  one  formed  for 
charitable  purposes. 

(d)  Public  corporations  are  those  created  for  political 
purposes.  Municipal  corporations  would  be  familiar  in- 
stances. 

(e)  A  private  corporation  is  one  founded  by  private 
enterprise.  Instances  would  be  ordinary  business  corpor- 
ations, banks,  insurance  companies,  etc. 

7.  Answer  briefly : 

(a)  How  may  corporations  be  created? 

(b)  What  acts  of  a  corporation  are  called  ultra  vires? 

(c)  What  is  a  franchise f 

(d)  Through  whom  does  a  corporation  act  in  transact- 
ing its  business  ? 

(e)  By  whom  must  all  contracts,  deeds,  mortgages, 
leases  and  other  instruments  binding  a  corporation  be 
signed  and  whence  do  the  signers  derive  their  authority? 

(/)  Explain  the  manner  of  issuing  and  of  transferring 
the  capital  stock  of  a  corporation  and  state  the  principal 
rights  acquired  by  stockholders. 

(g)  What  is  the  limit  of  a  stockholder's  liability? 

(h)   How  may  a  corporation  be  dissolved? 

(a)  Corporations  are  created  by  the  State  under  gen- 
eral or  special  law — that  is,  under  the  general  corporation 
law,  or  by  charter. 

(b)  All  acts  of  a  corporation  exceeding  the  powers  con- 
ferred upon  it  as  set  forth  in  its  articles  of  incorporation 


II 

are  termed  "ultra  vires,"  which  means  "beyond  the  power 
of." 

(c)  A  franchise  is  a  right  of  an  exclusive  character 
conferred  upon  a  corporation.  Thus  the  right  of  a  rail- 
road to  operate  its  road  is  called  its  franchise,  which  has 
a  value  in  itself  distinct  from  that  of  any  other  kind  of 
property. 

(d)  A  corporation  acts  through  its  officers,  who  are 
appointed  by  its  directors.  The  directors  are  elected  by 
the  stockholders. 

(e)  Such  documents  should  be  signed  by  the  president 
and  the  secretary.  They  derive  their  authority  from  the 
directors  as  expressed  by  resolutions,  recorded  in  the 
corporation  minute  book. 

(f)  Each  stockholder  receives  a  stock  certificate  stating 
on  its  face  the  number  of  shares  of  capital  stock  he  is 
entitled  to;  his  name;  and  the  par  value  of  the  shares. 
The  stub  of  the  stock  certificate  contains  the  same  particu- 
lars, which  are  posted  to  the  individual  account  of  the 
stockholder  in  the  sharer  ledger. 

When  a  stockholder  desires  to  transfer  he  executes  a 
bill  of  sale  and  power  of  attorney  authorizing  the  transfer 
— a  proper  form  for  which  is  printed  on  the  other  side  of 
the  certificate.  This  indorsed  certificate  is  then  handed 
to  the  proper  officer  of  the  corporation,  who  cancels  it 
and  issues  new  certificates — recording  the  transaction  on 
the  transfer  books. 

The  principal  rights  of  stockholders  are  (i)  to  vote  at 
meetings  held  for  the  election  of  officers;  (2)  to  partici- 
pate in  profit  earned  if  distributed  in  the  form  of  divi- 
dends. 

(g)  A  stockholder's  liability  is  generally  limited  to  the 


12 

amount  of  his  investment  as  evidenced  by  the  amount  of 
capital  stock  he  holds.  If  the  corporation  becomes  bank- 
rupt he  loses  the  amount  he  has  invested  and  has  no  fur- 
ther liability.  The  stockholders  of  National  Banks  are, 
however,  liable  for  the  par  value  of  their  holdings  and  for 
an  additional  amount  equal  thereto.  Thus,  if  $2,000 
stock  were  held  by  an  individual,  he  would  lose  this 
amount  and  be  personally  liable  to  the  extent  of  $2,000 
additional. 

(h)  Corporations  may  be  dissolved  by  act  of  legisla- 
ture ;  by  expiration  of  time  limit  as  per  charter ;  by  con- 
sent of  stockholders  and  surrender  of  franchise;  by  for- 
feiture of  franchise  for  "mis-user"  or  "non-user" ;  or  by 
a  "quo  warranto"  proceeding. 

8.  Answer  briefly: 

(a)  What  is  a  contract? 

(b)  How  is  a  contract  made? 

(c)  What  are  some  kinds  of  contracts  that  must  be  in 
writing  ? 

(d)  What  are  some  forms  of  contracts  that  must  be 
under  seal? 

(e)  Which  contracts  if  made  on  Sunday  are  void,  and 
which  are  not  void  ? 

(a)  A  contract  is  an  agreement  between  two  or  more 
persons  to  do  or  not  to  do  some  particular  thing  for  a 
consideration. 

(b)  A  contract  is  made  orally,  in  writing,  or  in  writing 
under  seal.  The  two  former  contracts  are  called  "parol" 
contracts ;  the  latter  a  "specialty"  contract. 

(c)  All  those  stipulated  in  the  "Statute  of  Frauds," 
which  requires  that  the  following  kinds  of  contracts  must 
be  in  writing  in  order  to  be  binding:   (i)   Promises  to 


13 

answer  for  the  debt,  default  or  miscarriage  of  another; 
(2)  Agreements  made  in  consideration  of  marriage,  except 
mutual  promises  to  marry;  (3)  Leases  of  land  for  more 
than  one  year ;  (4)  Contracts  for  the  sale  of  lands  or  any 
interest  in  lands;  (5)  Agreements  that  by  their  terms  are 
not  to  be  performed  within  one  year  from  the  making  of 
them;  (6)  Agreements  of  an  executor  or  administrator 
to  be  personally  responsible  for  the  debts  of  the  estate; 
(7)  Contracts  for  the  sale  of  personal  property  involving 
more  than  fifty  dollars,  unless  some  part  of  the  property 
be  delivered,  some  part  of  the  price  be  paid,  or  the  sale 
be  by  auction. 

(d)  Bonds,  deeds,  mortgages. 

(e)  As  a  rule  all  contracts  made  on  Sunday  are  void 
except  such  as  would  come  under  the  heads  of  "works  of 
mercy"  and  "works  of  necessity."  It  will  be  noted  that 
the  latter  phrase  is  capable  of  a  very  wide  interpretation. 

9.  Answer  briefly: 

(a)  What  is  a  debt  and  what  can  a  creditor  demand 
in  payment  of  a  debt  ? 

(b)  When  a  creditor  accepts  in  satisfaction  payment 
of  less  than  the  full  amount  of  a  debt,  how  can  the  debtor 
guard  against  further  demands? 

(c)  When,  where,  and  to  whom  must  payment  of  a 
debt  be  made  ? 

(d)  Is  a  debtor  legally  entitled  to  a  receipt? 

(e)  Which  has  the  prior  right  to  apply  a  payment 
against  any  one  of  several  debts,  the  debtor  or  the  cred- 
itor? 

(f)  When  a  partial  payment  is  made  on  a  debt  bearing 
interest,  in  what  manner  is  it  applied? 

(g)  When  does  the  period  of  limitation  begin  to  run, 
and  what  are  some  of  the  ways  in  which  its  operation 
can  be  modified? 


14 

(a)  A  debt  is  the  amount  of  money  due  from  one 
person  (the  debtor)  to  another  (the  creditor). 

The  creditor  can  demand  in  payment  legal  tender 
money. 

(b)  He  should  secure  a  release  under  seal,  which  being 
a  specialty  contract  implies  a  consideration;  or  he  might 
in  addition  to  paying  the  sum  agreed  on  as  satisfaction  of 
the  full  debt  pay  some  nominal  sum  as  a  consideration. 

(c)  A  debt  must  be  paid  on  the  day  it  falls  due.  It 
must  be  paid  at  place  specified  (if  any),  or  at  the  creditor's 
residence  or  place  of  business.  Payment  must  be  made 
to  the  creditor  or  to  his  agent  or  representative. 

(d)  No;  only  as  a  matter  of  courtesy.  His  protection 
is  to  take  a  witness. 

(e)  The  debtor. 

(/)  Interest  is  first  paid;  the  balance,  if  any,  being 
applied  to  principal. 

(g)  The  period  of  limitation  begins  to  run  whenever 
the  debt  is  due,  or  whenever  an  action  for  its  recovery 
might  have  been  commenced.  Its  operation  may  be  modi- 
fied by  the  absence  of  the  creditor  or  debtor  from  the 
State  at  the  time  the  debt  became  due — when  the  term  of 
limitation  is  extended  to  date  of  return  into  the  State. 
A  new  promise  to  pay  or  part  payment  of  principal  or 
interest  renews  the  debt,  and  makes  it  good  again  for  the 
period  dating  from  the  new  promise. 

ID.  What  is  a  partnership  f  How  may  the  relationship 
of  partner  be  established  ?  Define  nominal  partner,  silent 
partner,  dormant  partner,  special  partner. 

The  relationship  of  partnership  results  from  an  agree- 
ment between  two  or  more  persons  to  place  their  money 


15 

or  its  equivalent  in  some  undertaking,  and  to  share  the 
profits  and  losses  in  certain  proportions.  Its  relationship 
may  be  established  by  entering  into  a  written  contract  of 
agreement  termed  articles  of  co-partnership;  by  oral 
agreement,  or  by  implication — i,  e,,  where  the  relationship 
of  partnership  is  assumed  from  the  acts  of  the  parties. 

Nominal  partner :  One  in  name  only.  He  has  no  voice 
in  the  conduct  of  the  business  nor  any  interest  either. 
But  he  is  liable  for  its  debts. 

Silent  partner:  One  who  invests  money  in  a  firm  or 
enterprise,  but  whose  name  does  not  appear  as  partner, 
although  he  has  a  voice  in  controlling  the  affairs  of  the 
business.  He  is  Uable  the  same  as  other  partners  as  soon 
as  his  proper  relationship  becomes  known. 

Dormant  partner :  One  who  is  either  silent  or  ostensible, 
but  has  no  voice  in  the  management  of  the  business. 

Special  partner:  One  whose  Uability  is  limited  to  the 
amount  of  his  investment.  He  is  a  member  of  a  limited 
partnership,  but  has  no  right  to  participate  in  the  manage- 
ment. 


II.  In  what  respects  are  partners  trustees  for  each  other 
and  in  what  respects  are  they  agents  for  each  other? 


As  between  themselves  partners  are  trustees  for  one 
another  in  regard  to  the  firm  property.  They  are  agents 
for  each  other  inasmuch  as  they  may  individually  bind  the 
firm  by  contracts  with  third  persons  within  the  scope  of 
the  partnership  business. 


12.  What  are  the  relative  liabilities  of  a  new  partner 
and  a  retiring  partner? 


i6 

A  new  partner  is  not  liable  for  the  debts  of  the  firm 
prior  to  his  becoming  a  member  of  it  unless  he  expressly 
agrees  to  become  so.  He  may  become  so  by  agreement 
with  a  retiring  partner  to  assume  his  share  of  the  liabili- 
ties, however. 

A  retiring  partner  is  liable  for  any  debts  incurred  by 
the  firm  subsequent  to  his  retirement,  in  case  of  a  failure, 
unless  he  publishes  the  fact,  and  sends  proper  notices 
to  creditors,  etc. 

13.  How  is  a  limited  partnership  formed? 

A  limited  partnership  can  only  be  formed  in  those  States 
where  statutes  have  been  enacted  authorizing  the  formation 
of  limited  partnerships.  The  parties  forming  this  connec- 
tion must  make  and  sign  a  certificate  or  agreement  which 
is  properly  executed  and  filed  with  the  public  records  of 
the  State  and  county  in  which  the  business  is  to  be  con- 
ducted. The  certificate  must  include  the  firm  name,  names 
of  partners,  and  amount  of  capital  contributed  by  each. 
It  is  not  infrequently  found  that  a  firm  contains  general 
and  special  partners.  The  liability  of  the  special  partners 
would,  of  course,  be  limited,  while  that  of  the  general 
partners  would  not. 

14.  State  the  difference  between  a  sale  and  a  consign- 
ment. 

A  sale  is  a  transfer  of  the  title  of  property  as  well  as 
that  of  the  property  itself  from  one  person  to  another  for 
a  consideration.  A  consignment  is  the  transfer  of  the 
custody  of  property  without  transfer  of  the  title  to  the 
consignee.    The  property  still  belongs  to  the  consignor. 


17 

15-  What  kind  of  action  can  the  consignor  maintain 
against  a  consignee  who  converts  to  his  own  use  the  pro- 
ceeds of  the  sale  of  consignor's  goods? 

He  can  maintain  either  a  criminal  action  against  the 
consignee  for  wrongful  conversion,  or  a  civil  action  for 
default  in  respect  to  accounting,  or  both  at  one  and  the 
same  time. 


i8 


June  1897* 

1.  What  is  a  bailment f  State  the  titles,  general  re- 
lations and  respective  obligations  of  the  parties  to  a  bail- 
ment. 

A  bailment  is  a  delivery  of  personal  property  by  one 
person  to  another  upon  a  contract,  express  or  implied, 
that  the  person  to  whom  the  goods  are  delivered  will  con- 
form to  the  purpose  or  object  for  which  the  property  was 
delivered.  The  party  who  receives  the  property  in  trust 
is  called  the  bailee;  the  party  who  delivers  it,  the  bailor. 
The  respective  obligations  of  the  parties  to  a  bailment 
and  the  consequent  degree  of  responsibility  attaching  to 
each  depends  upon  the  kind  of  bailment — whether  it  is  for 
the  benefit  of  the  bailor  exclusively,  the  bailee  exclusively, 
or  both.  The  bailee  would  have  to  take  care  of  the  prop- 
erty entrusted  to  him,  and  in  doing  so  would  have  to  ex- 
ercise ordinary,  extraordinary  or  slight  diligence — de- 
pendent upon  who  was  to  be  benefited.  On  the  other  hand, 
the  bailee  would  be  held  responsible  for  ordinary,  slight, 
or  extraordinary  negligence  in  the  care  of  the  property. 

2.  Define  the  following  kinds  of  bailment:  (a)  de- 
posit,  (b)  commission  or  mandate,  (c)  loan  for  use, 
(d)  pledge,  (e)  bailment  for  hire. 

(a)  A  deposit  bailment  is  a  delivery  of  property  to  the 
bailee  to  be  kept  by  him  without  reward,  and  to  be  deliv- 


19 

ered  as  per  contract.  (N.  B.,  ''without  reward''  does  not 
mean  "without  consideration,"  or  there  would  be  no 
valid  contract.  In  this  case  the  "inducement"  is  the  con- 
sideration). 

(fc)  A  commission  or  mandate  bailment  is  one  where 
the  bailee  agrees  to  do  something  with  the  thing  bailed 
for  the  bailor  without  compensation. 

(c)  A  loan  for  use  bailment  is  the  loan  of  something 
to  the  bailee  to  be  used  by  him  without  payment  and  re- 
turned to  the  bailor  or  disposed  of  according  to  his  direc- 
tion when  the  bailment  terminates.      9  ^^<^'^  ^t>  a  -no  r/ 

(d)  A  pledge  bailment  is  one  where  the  custody  of 
personal  property  is  transferred  to  the  bailee  as  security 
for  the  payment  of  a  debt  or  the  performance  of  some 
other  obligation. 

{e)  A  bailment  for  hire  is  a  delivery  of  personal  prop- 
erty where  compensation  is  given  for  usage,  etc.  Bail- 
ments for  hire  are  divided  into  (i)  hire  of  things,  (2)  hire 
of  services,  (3)  hire  of  custody,  and  (4)  hire  of  carriage. 

3.  State  the  principal  points  of  law  governing  bail- 
ments, in  respect  to  (a)  return  of  property  to  bailor, 
{b)  use  of  property  by  bailee,  (c)  sale  of  pledge  by  bailee, 
{d)  liability  of  bailee. 

(a)  Return  of  property  to  bailor: 

(i)  Deposit  bailment:  property  must  be  returned  to 
the  bailor  at  a  certain  time,  or  on  demand,  or  to  a  third 
party  at  a  certain  time  or  on  demand. 

(2)  Loan  for  use:  property  must  be  returned  by  the 
borrower  at  the  time,  place,  and  in  the  manner  agreed  on. 
If  no  time  is  specified,  it  must  be  returned  within  a  reason- 
able time;  if  no  place  is  stated,  it  must  be  returned  to 


20 


the  bailor  at  his  residence  or  the  place  where  it  was  taken 
from. 


(3)  Bailment  for  hire:  the  bailee  must  return  the  prop- 
erty when  the  purpose  of  the  bailment  is  fulfilled  in  as 
good  condition  as  received,  natural  wear  excepted. 

(b)  Use  of  property  by  bailee : 

( 1 )  Deposit  bailment :  bailee  must  not  use  the  property 
except  it  would  be  benefited  thereby.  Should  he  do  so 
he  must  account  to  bailor  for  profits  less  expenses  incurred 
by  him. 

(2)  Pledge  bailment:  bailor  has  not  the  right  to  use 
the  property,  but  only  to  hold  it.  But  should  usage  be 
necessary  for  the  preservation  of  the  property,  he  must 
account  to  bailor  for  profits. 

(3)  Bailment  for  hire:  property  hired  must  be  used 
only  for  the  purpose  specified. 

(c)  Sale  of  pledge  by  bailee: 

(i)  Pledge  bailment:  before  the  bailee  can  sell  the 
pledge,  he  must  make  proper  demand  for  payment  of  the 
debt  after  it  becomes  due.  Payment  having  been  refused 
on  demand,  he  must  give  proper  notice  to  bailor  to  redeem 
the  pledge,  notify  him  of  time  and  place  of  sale,  sell  the 
pledge,  and  apply  the  proceeds  to  payment  of  the  debt. 
The  bailee  cannot  retain  the  property  as  an  oflfset  against 
the  debt ;  he  must  sell  it  at  an  open,  public  sale. 

(2)  Bailment  for  hire:  if  charges  are  not  paid  within 
a  reasonable  time,  the  bailbi^,  after  public  notice,  may 
sell  the  property,  compensate  himself  out  of  the  proceeds, 
and  return  the  remainder  less  costs  to  the  bailor. 

(d)  Liability  of  bailee: 

(i)  Deposit  bailment:  this  being  for  the  sole  benefit 


21 

of  the  bailor,  the  bailee  is  only  liable  for  gross  negligence 
in  the  care  of  the  property. 

(2)  Commission  bailment:  the  liability  of  the  bailee 
is  the  same  as  in  the  deposit  bailment,  and  for  the  same 
reason. 

(3)  Loan  for  use:  here  the  bailment  is  for  the  exclu- 
sive use  of  the  bailee,  and  he  would  be  held  responsible 
for  slight  negligence.  He  would,  however,  be  exempted 
from  liability  for  inevitable  accidents,  i.  e.,  such  as  could 
not  be  foreseen  and  guarded  against. 

(4)  Pledge  bailment :  the  bailee  in  this  case  would  be 
liable  for  ordinary  negligence  as  the  bailment  is  for  the 
benefit  of  bailor  and  bailee. 

(5)  Bailment  for  hire:  the  bailee  is  responsible  for 
ordinary  negligence. 

4.  What  are  common  carriers?  To  what  extent  is  a 
common  carrier  liable  as  insurer?  What  security  has 
the  carrier  for  the  payment  of  his  charges? 

Common  carriers  are  persons  who  make  a  continuous 
offer  to  the  public  to  transport  passengers  or  merchandise 
in  consideration  of  receiving  compensation  for  their  risk 
and  labor. 

He  is  an  insurer  of  the  safety  of  the  goods  he  car- 
ries and  is  responsible  for  injury  to  them  unless  such 
be  caused  by  the  act  of  God  or  the  public  enemy.  Even 
then  he  may  be  held  liable  if  his  previous  neglect  brought 
the  property  into  danger  resulting  in  such  loss. 

He  has  a  lien  on  the  property  he  carries  as  security  for 
the  payment  of  his  charges. 

5.  What  is  a  general  assignment  and  under  what  cir- 


22 

cumstances  may  it  be  set  aside  ?  What  advantage  to  the 
debtor  has  an  insolvent  assignment  over  a  general  assign- 
ment ?    What  are  preferences  in  an  assignment  ? 

A  general  assignment  is  the  transfer  by  a  debtor  of  all 
his  property  to  another  party  for  the  benefit  of  his  cred- 
itors. If  made  for  the  purpose  of  keeping  it  out  of  the 
hands  of  his  creditors  such  a  transfer  is  a  fraud  upon 
them  and  can  be  set  aside. 

Under  the  bankruptcy  laws  the  debtor  who  has  trans- 
ferred all  his  property  to  a  trustee  elected  by  his  creditors 
or  by  the  court,  who  has  been  honest  in  his  business  re- 
lations, who  has  not  defrauded  any  of  his  creditors  or 
wilfully  injured  property,  and  who  has  acted  in  accord- 
ance with  the  requirements  of  the  statute,  after  his  adju- 
dication as  a  bankrupt,  may  obtain  a  discharge  from  all 
his  debts  in  full,  except  taxes.  His  creditors  must  accept 
the  compensation  offered  them,  and  the  debtor  if  sued  on 
any  debt  from  which  the  order  discharges  him,  may  plead 
his  discharge  as  a  defence,  and  thuse  defeat  the  action. 
In  the  case  of  a  general  assignment  the  acceptance  of 
anything  less  than  the  full  amount  of  a  debt  is  optional 
with  any  creditor,  and  the  debtor  may  at  any  time  be  suc- 
cessfully sued  by  a  dissatisfied  creditor.  The  advantages 
of  the  former  kind  of  assignment  are,  therefore,  obvious. 

Preferences  are  now  only  those  claims  whose  payment 
is  provided  for  under  the  bankruptcy  law,  viz.,  all  taxes, 
State  and  Federal,  and  wages  (not  exceeding  $300  to  any 
one  person).  They  are  so  called  because  they  must  be 
paid  in  full  before  any  distribution  of  the  assets  is  made 
amongst  the  creditors. 


23 

6.  When  a  partnership  assigns : 

(a)  By  whom  must  the  instrument  be  executed? 

(b)  What  property  may  be  included? 

(c)  What  debts  must  first  be  discharged? 

(a)  The  instrument  must  be  executed  by  all  the  part- 
ners. 

(b)  All  firm  assets. 

(c)  Taxes  and  wages  first;  then  general  creditors. 
Next  come  loans  to  firm  by  partners,  and  lastly  capital  in- 
vestments. 

7.  Answer  briefly   the   following: 

(a)  What  are  the  powers  of  an  assignee? 
(6)   How  must  an  assignee  quaHfy? 
(c)  How  may  an  assignee  resign ? 

(a)  His  powers  are  to  convert  all  assets  into  cash,  and, 
if  necessary,  to  sue  debtors.  He  may  then  divide  the  pro- 
ceeds ratably  among  the  creditors. 

(b)  The  assignee  must  qualify  by  filing  inventories  and 
schedules  of  assets  and  liabilities  and  giving  a  bond  as 
security  for  the  faithful  performance  of  his  duties. 

(c)  An  assignee  may  resign  by  filing  a  complete  state- 
ment of  his  fiscal  acts  to  date,  supported  by  vouchers,  and 
getting  released  from  his  bond. 

8.  What  courses  of  action  under  the  insolvent  laws  are 
open  to  a  debtor  who  is  unable  to  discharge  his  obliga- 
tions ? 

He  may  make  a  general  assignment  and  compound  with 
creditors,  getting  released  in  full  from  obligations ;  or  he 
may  voluntarily  ask  to  be  adjudged  a  bankrupt,  and  in 


24 

due  course  ask  for  his  discharge,  which  would  free  him 
from  all  liabilities. 

Ky  9.  Define  briefly  the  following  instruments:     (a)   bill 

of  lading,  (b)  charter  party,   (c)  consular  invoice,  (d) 
bottomry  bond,  (e)  respondentia  bond. 

(a)  A  bill  of  lading  is  a  written  memorandum  signed 
by  the  captain  of  a  vessel  as  agent  for  the  owner  or  char- 
terer, and  delivered  to  the  shipper  acknowledging  that  the 
goods  mentioned  in  it  have  been  received  upon  the  vessel 
for  transportation. 

(b)  A  charter  party  is  the  contract  by  which  a  vessel 
is  hired. 

(c)  A  consular  invoice  is  a  bill  made  out  by  a  shipper 
of  merchandise  from  one  country  to  another  containing 
cost  price,  quantity  and  description  of  goods  shipped,  and 
sworn  to  before  the  consul  of  the  country  they  are  intend- 
ed for  at  the  port  of  shipment. 

(d)  A  bottomry  bond  is  the  obligation  given  for  a  loan 
secured  upon  a  vessel  and  its  accruing  freight  charges.    ' 

(e)  A  respondentia  bond  is  the  same,  only  the  security 
is  the  vessel's  cargo. 

10.  What  is  a  guaranty  f  State  the  titles  and  the  mu- 
tual relations  of  the  parties  to  a  guaranty  and  the  con- 
sideration necessary  to  make  it  binding.  How  may  a 
surety  be  relieved  from  liability? 

A  guaranty  is  a  contract  by  which  one  person  agrees 
to  become  responsible  for  the  debt  or  default  of  another. 

There  are  three  parties  to  a  guaranty :  the  debtor,  who 
is  primarily  responsible;  the  creditor  to  whom  he  is  re- 
sponsible; and  the  guarantor.     Where  the  guaranty  is 


25 

made  at  the  same  time  as  the  principal  contract  one  con- 
sideration will  support  both.  But  if  the  guarantee  be 
made  subsequently,  there  must  be  separate  consideration 
to  make  the  contract  binding.  A  nominal  sum  would 
be  sufficient. 

In  the  case  of  a  continuing  guaranty  the  surety  may  be 
relieved  from  liability  if  the  agreement  be  altered;  if  the 
time  of  payment  be  extended ;  or  if  fraud  has  been  prac- 
ticed upon  him. 

11.  What  is  the  extent  of  the  liability  of  the  guarantor 
under  each  of  the  following:  (a)  guaranty  for  payment, 
(b)  guaranty  for  collection,   (c)  continuing  guaranty? 

(a)  In  the  guaranty  for  payment  the  guarantor  be- 
comes absolutely  liable  for  the  full  amount  of  the  debt 
immediately  the  debtor  refuses  to  pay  it. 

(b)  In  the  guaranty  for  collection  the  necessity  is 
placed  upon  the  creditor  to  show  that  he  is  unable  to  col- 
lect from  the  debtor  by  legal  process  before  the  guarantor 
can  be  called  upon;  but  when  that  point  is  proved  the 
creditor  can  collect  from  the  guarantor  the  full  amount 
of  the  debt,  and  any  costs  he  has  had  to  pay  in  his  attempts 
to  collect  from  the  debtor. 

(c)  In  the  continuing  guaranty  the  guarantor  guaran- 
tees all  indebtedness  up  to  a  certain  amount,  and  so  long 
as  the  specified  amount  is  not  exceeded,  he  is  absolutely 
liable,  for  the  debtor's  default. 

12.  On  what  loans  may  a  higher  rate  of  interest  than 
6%  be  taken? 

What  is  the  time  for  the  payment  of  a  note  falling  due 
on  (a)  Saturday,  (b)  Sunday,  (c)  Saturday  when  the 
following  Monday  is  a  legal  holiday? 


26 

Pawnbroker's  loans;  call  loans  in  Wall  street;  and  mar- 
itime loans. 

(a)  Due  Saturday;  time  for  payment,  Monday. 

(b)  Due  Sunday;  time  for  payment,  Monday. 

(c)  Due  Saturday  when  the  following  Monday  is  a 
legal  holiday;  time  for  payment,  Tuesday. 

13.  In  the  case  of  a  debt  secured  by  collateral  what 
course  is  open  to  the  creditor? 

The  creditor  may  sell  the  collateral  at  public  sale,  re- 
coup himself  for  debt  and  interest,  and  return  excess  bal- 
ance (if  any)  to  debtor. 


14.  Define  briefly  each  of  the  following  terms:  (a) 
agent,  (b)  agency,  (c)  general  agent,  (d)  special  agent, 
(e)  power  of  attorney,  (f)  In  what  cases  is  an  acknowl- 
ment  of  execution  of  a  power  of  attorney  necessary  ? 


(a)  Agent — one  who  acts  for  and  represents  another, 
called  his  principal. 

(b)  Agency — the  legal  relation  existing  between  an 
agent  and  his  principal. 

(c)  General  agent — one  who  is  appointed  to  do  acts  of 
a  class. 

(d)  Special  agent — one  who  is  appointed  to  do  indi- 
vidual acts. 

(e)  Power  of  attorney — an  instrument  under  seal  for- 
mally constitutmg  one  person  agent  for  another. 

(f)  An  acknowledgment  of  execution  of  a  power  of  at- 
torney is  necessary  whenever  the  authority  conferred  is  to 
execute  any  instrument  that  is  to  be  recorded. 


15-  In  a  certain  stock  corporation  only  50%  of  the  sub- 
scribed capital  has  been  called.  A  has  paid  all  the  install- 
ments called  and  has  loaned  to  the  company  an  additional 
sum,  for  which  he  has  taken  its  promissory  note,  and  has 
transferred  the  note  to  B.  B  demands  payment.  May 
the  company  call  further  installments  on  A's  stock,  and 
offset  the  amount  so  called  against  the  promissory  note 
held  by  B?     Explain  your  answer. 

The  corporation  may  call  further  installments  on  all  of 
its  capital  stock,  but  not  on  A's  only.  The  amount  so 
called  could  not  be  offset  against  the  note  held  by  B  for 
the  reason  that  if  a  note  is  transferred  for  value  before 
maturity,  it  cuts  off  cross  claims  and  other  defences  which 
might  have  been  set  up  if  the  note  had  remained  in  the 
hands  of  A. 


28 


December  1897* 


1.  What  is  an  executory  contract,  and  in  what  respect 
does  it  differ  from  a  contract  executed? 

An  executory  contract  is  one  in  which  the  thing  agreed 
upon  has  not  been  done;  where  it  has,  the  contract  is 
termed  executed.  A  contract  may  be  executory  on  the 
part  of  one,  and  executed  on  the  part  of  the  other  party  to 
it.  An  executed  contract  signifies  that  the  rights  referred 
to  in  it  have  been  acquired. 

2.  State  (a)  the  essentials  to  the  vaHdity  of  a  contract, 
(b)  exceptions  to  the  general  rule  as  to  the  validity  of 
a  contract,  (c)  the  act  or  acts  necessary  to  make  a  con- 
tract of  sale  valid. 

(a)  To  make  a  valid  contract  the  parties  to  it  (i)  must 
be  competent;  (2)  must  give  their  consent;  (3)  there 
must  be  consideration ;  and  (4)  subject  matter,  i.  e.,  some- 
thing to  contract  about. 

(6)  Exceptions: 

(i)As  to  competency:  certain  persons  have  been  de- 
clared by  law  incompetent  to  make  valid  contracts.  Such 
are  the  insane,  idiots,  drunkards,  infants,  and  alien  ene- 
mies. But  insane  persons  may  make  valid  contracts  in 
lucid  intervals;  drunkards,  when  sober;  and  infants  for 
necessaries. 


29 

(2)  As  to  consent:  parties  may  have  consented,  yet 
the  contract  may  be  invaHd ;  for  the  consent  may  have  been 
given  without  understanding  the  terms  of  the  agreement, 
or  through  duress  or  fraud. 

(3)  As  to  consideration:  specialty  contracts  are  said 
to  import  a  consideration.  Negotiable  paper  in  the  hands 
of  an  innocent  purchaser  can  be  collected  from  the  maker 
by  the  holder,  although  not  by  the  original  payee  to  whom 
the  note  was  given  as  accommodation,  i.  e.,  "without  con- 
sideration." 

(4)  As  to  subject  matter:  the  contract  may  possess 
every  element  of  validity  and  yet  be  invalid,  because  the 
law  has  declared  that  certain  subjects  contracted  on  can- 
not be  enforced.  Such  are  those  that  are  against  public 
policy,  immoral,  or  fraudulent. 

(c)  The  acts  necessary  to  make  a  contract  of  sale  valid 
are  offer,  acceptance,  and  conformity  to  the  statute  of 
frauds. 


3.  (a)  When  goods  are  sold  on  credit,  in  whom  is  the 
right  of  possession  and  of  property  vested  ? 

(b)  State  the  rights  of  the  vendor  and  of  the  vendee 
in  case  of  the  insolvency  of  the  vendee  before  obtaining 
possession. 

(a)  In  the  vendee. 

(b)  The  vendor  has  the  right  of  "stoppage  in  transitu." 
The  vendee  has  the  right  to  pay  for  the  goods  and  compel 
delivery. 

4.  (a)  After  the  delivery  of  goods  to  a  common  car- 
rier, as  ordered  by  the  vendee,  in  whom  do  the  right  of 
property  and  the  risk  rest? 


30 

(6)  What  rights  or  remedies  has  the  vendor  of  goods 
sold  on  credit,  in  case  the  vendee  becomes  insolvent  while 
the  goods  are  in  transitu  f 

(a)  The  vendee. 

(b)  He  has  the  right  of  stoppage. 

5.  Show  the  difference  between  a  general  agent  and  a 
special  agent. 

The  decision  of  the  Supreme  Court  of  the  United  States 
is :  "A  general  agent  is  one  who  is  appointed  to  do  acts 
of  a  class,  while  a  special  agent  is  one  appointed  to  do 
individual  acts." 

6.  What  redress  has  a  principal  in  case  his  agent 
pledges  (a)  the  goods  of  the  principal,  (b)  the  negotia- 
ble paper  of  the  principal? 

(a)  This  would  depend  largely  upon  trade  custom 
and  the  use  the  agent  makes  of  the  avails  of  the  pledge. 
If  the  agent  does  not  disclose  the  name  of  his  principal 
and  converts  to  his  own  personal  use  the  proceeds,  he 
could  be  sued  in  both  a  civil  and  a  criminal  action,  and  the 
goods  probably  be  replevined. 

(b)  In  this  case  unless  the  agent  is  empowered  to  sign 
for  his  principal  he  would  have  to  commit  forgery  to  ne- 
gotiate the  notes.  The  principal  could  then  institute  crim- 
inal proceedings  against  his  agent,  and  by  notifying  the 
makers  of  the  notes  of  the  forgery  secure  payment  at 
maturity. 

7.  (a)  To  what  extent  is  a  principal  bound  by  a  con- 
tract made  by  his  agent? 

(b)  In  the  case  of  goods  sold  by  an  agent,  what  are 
the  rights  of  the  principal  in  respect  to  payment  by  the 
purchaser  ? 


31 

(a)  So  long  as  an  agent  acts  within  the  scope  of  his 
authority  the  principal  is  liable  for  all  contracts  made  by 
him.  The  principal  will  also  be  bound  if  the  agent  exceeds 
his  authority,  if  his  acts  are  apparently  authorized  by  him 
(the  principal),  or  by  business  usages.  This  applies  only 
to  general  agents.  In  the  case  of  special  agents  the  prin- 
cipal will  only  be  bound  by  contracts  specifically  author- 
ized by  him  and  cannot  be  held  should  the  agent  exceed 
his  authority.  It  is  the  duty  of  third  parties  in  contract- 
ing with  a  special  agent  to  inform  themselves  of  the  pre- 
cise extent  of  his  authority. 

(b)  The  principal  may  direct  that  all  payments  be 
made  to  him  personally,  and  he  has  the  right  to  sue  where 
payment  so  asked  for  is  refused. 

8.  What  is  each  of  the  following:  (a)  a  general  lien, 
(b)  a  particular  lien?  State  what  is  necessary  to  create 
a  lien. 

(a)  A  general  lien  is  the  right  of  one  party  to  retain 
possession  of  any  property  of  another  against  whom  he 
has  a  claim. 

{b)  A  particular  lien  is  the  right  of  one  party  to  re- 
tain possession  of  some  particular  property  in  connec- 
tion with  which  he  has  some  claim  against  another.  Fa- 
milar  instances  would  be  the  lien  of  a  common  carrier, 
of  a  bailee,  or  of  an  inn-keeper. 

To  create  a  lien  there  must  be  possession,  either  legal 
or  equitable,  of  the  property  liened,  and  some  charges 
due  upon  the  same. 

9.  Show  how  the  authority  of  an  agent  may  terminate. 
The  authority  of  an  agent  may  terminate  (i)  by  revo- 


32  \ 

cation  of  his  authority  by  his  principal ;  (2)  by  renouncing  I 
the  authority  of  his  principal;  (3)  by  expiration  of  time 
limit,  when  he  is  appointed  for  a  certain  stated  period; 

(4)  by  such  a  change  in  the  condition  of  either  principal  ; 

or  agent  as  would  produce  incapacity  to  act,  e.  g.,  insanity,  ' 

bankruptcy  or  death.  ^ 

10.  Define  partnership,  general  partner,  special  part-  \ 
ner.  State  the  rights  of  a  special  partner  in  case  of  the  ; 
insolvency  of  the  firm. 

Partnership  results  from  a  contract  entered  into  by  two 
or  more  persons  to  combine  their  money,  effects,  labor, 
or  skill,  or  some  or  all  of  them,  in  some  lawful  business 
and  to  share  the  profits  and  losses  as  such  between  them. 

A  general  partner  is  one  of  the  ordinary  partners  in  a 
firm  and  is  personally  liable  to  firm  creditors  not  only  ; 
for  the  amount  of  capital  he  contributes  to  the  firm,  but  if  \ 
the  firm  assets  are  insufficient  to  pay  its  creditors  in  full,  ! 
he  is  personally  liable  to  the  full  extent  of  all  his  private  \ 
property.  \ 

A  special  partner  is  a  member  of  a  limited  partnership,     i 
his  share  of  liability  to  firm  creditors  being  limited  to  the 
amount  of  his  capital  investment.     He  takes  no  share  in 
the  management  of  the  affairs  of  the  firm ;  if  he  does,  he     i 
may  be  held  liable  as  a  general  partner.     In  a  limited     ■ 
partnership  it  is  usual  to  find  general  partners  and  one  or 
more  special,  who  are  separately  designated  as  such. 

His  rights  are  restricted  to  immunity  from  any  greater 
claims  than  the  amount  of  his  capital.  ; 

11.  (a)  To  what  extent  does  the  act  of  one  partner  ! 
bind  his  copartners?  ^ 

(b)  Must  a  partner  account  to  his  firm  for  profits  j 
made  by  him  in  a  separate  business?  j 


33 

(c)  State  the  process  of  dissolving  a  partnership. 

(a)  A  partner  is  an  agent  of  the  firm  and  also  of  his 
co-partners  for  the  purposes  of  the  partnership  business. 
Any  act  therefore  done  by  one  partner  in  carrying  on  firm 
business  in  the  usual  way  is  binding  on  his  co-partners. 
He  may  hire  agents,  buy  and  sell  goods,  pay  and  collect 
debts,  and  in  general,  enter  into  all  contracts  for  them 
within  the  scope  of  the  partnership  concern. 

(b)  It  would  depend  upon  the  terms  of  the  articles  of 
co-partnership.  If  it  were  stipulated  that  each  partner 
was  to  devote  the  whole  of  his  time  exclusively  to  partner- 
ship business,  and  it  could  be  proved  that  such  business 
had  suffered  through  the  failure  of  one  of  the  partners  to 
do  so,  in  consequence  of  attending  to  the  affairs  of  his 
separate  business,  it  is  probable  that  he  would  have  to  ac- 
count to  his  firm  for  profits  made  in  such  business.  But 
if  this  stipulation  were  not  inserted,  and  bad  faith 
towards  his  firm  could  not  be  proved,  it  is  very  question- 
able whether  he  could  be  so  called  on. 

Of  course,  if  he  made  use  of  the  firm  assets  in  the  pros- 
ecution of  a  separate  business,  he  could  undoubtedly  be 
called  on  for  an  accounting  to  the  other  members  of  his 
firm. 

(c)  Partnership  may  be  dissolved  (i)  by  the  act  of  the 
parties — mutual  consent  or  otherwise;  (2)  by  the  act  of 
God,  as  the  death  of  one  of  the  partners ;  (3)  by  act  of  the 
law,  as  the  bankruptcy  of  the  firm  or  one  of  the  partners  ; 
(4)  by  a  valid  assignment  of  all  the  partnership  effects  for 
the  benefit  of  creditors;  (5)  by  the  assignment  of  the 
whole  of  one  partner's  interests  to  his  co-partner,  or  a 
stranger ;  (6)  by  limitation,  i.  e.,  expiration  of  the  period 
for  which  the  partnership  was  formed. 


34 

Either  a  receiver  is  applied  for  or  one  of  the  partners 
agrees  to  act  for  the  others  with  powers  in  liquidation. 
He  (i)  completes  unfinished  engagepients ;  (2)  converts 
into  cash  the  assets;  (3)  liquidates  outside  and  then 
partnership  liabilities,  i.  e.,  capital  prcf  rata. 

12.  State  briefly  the  effects  of  a  dissolution  of  a  part- 
nership on  the  rights  and  powers  of  the  individual  part- 
ners. 

On  the  dissolution  of  a  partnership  the  right  of  the 
members  to  bind  one  another  as  agents  ceases.  The  liqui- 
dating partner  has  the  power  to  make  such  contracts  as 
may  be  necessary  to  finish  up  uncompleted  firm  engage- 
ments, but  he  is  not  allowed  as  a  rule  to  make  further 
engagements.  His  powers  are  strictly  what  is  termed  "in 
liquidation." 

13.  Explain  the  following  points  regarding  a  guaranty : 
(a)  nature  and  purpose,  (b)  manner  of  making,  (c)  how 
the  position  of  a  guarantor  of  negotiable  paper  differs 
from  that  of  an  indorser. 

(a)  A  guaranty  is  an  agreement  by  one  party  to  be- 
come responsible  for  the  debt  or  default  of  another,  which, 
in  order  to  conform  to  the  statute  of  frauds,  must  be  in 
writing.  The  parties  to  it  are  the  creditor,  the  debtor  and 
the  guarantor.  Its  purpose  is  the  guaranteeing  to  the 
party  to  whom  given  the  payment  of  a  debt  or  the  per- 
formance of  certain  duty  by  a  third  party. 

(b)  Being  a  contract,  there  must  be  consideration. 
If  the  guaranty  be  given  at  the  time  the  principal  contract 
is  made,  the  original  consideration  will  support  the  guar- 
anty also.    But  if  made  at  any  subsequent  time  separate 


35 

consideration  must  be  given.  The  guarantor  simply 
writes  for  value  received:    I  guarantee  the  payment  (or 

collection,  or )  of  this and  signs 

his  name  with  guarantor  underneath. 

(c)  The  position  of  a  guarantor  of  negotiable  paper 
differs  from  that  of  an  endorser  principally  in  this  re- 
spect: he  is  not  entitled  to  prompt  notice  of  protest. 
As  soon  as  the  debtor  fails  to  pay  he  must,  on  notification, 
pay  for  him.  But  as  an  offset  to  this  he  acquires  the 
right  of  subrogation. 

The  student  will  do  well  to  bear  in  mind  the  difference 
between  "guaranty  for  collection"  and  "guaranty  for  pay- 
ment." 

14.  (a)  Describe  the  steps  necessary  for  the  formation 
of  a  business  corporation. 

(b)  State  what  is  requisite  for  the  validity  of  a  con- 
tract by  a  corporation. 

(a)  The  name  of  the  proposed  corporation  having  been 
selected  by  the  incorporators  and  approved  (as  not  con- 
flicting with  that  of  any  existing  domestic  corporation) 
by  the  Secretary  of  State,  any  three  or  more  natural  per- 
sons, two-thirds  of  whom  must  be  citizens  of  the  United 
States,  and  at  least  one  of  them  a  resident  of  this  State, 
may  become  a  corporation  by  making,  signing,  acknow- 
ledging and  filing  a  certificate  which  shall  contain : 

The  name  of  the  corporation ; 

The  purpose  for  which  it  is  to  be  formed ; 

The  amount  of  the  capital  stock  and  amount  of  pre- 
ferred stock,  if  any ; 

The  number  and  par  value  of  shares  and  the  amount  of 
capital  with  which  it  is  proposed  to  begin  business ; 


36 

The  location  of  its  principal  business  office ; 

Its  duration; 

The  number  of  its  directors  (not  less  than  three) ; 

The  names  and  post  office  address  of  directors  for  the 
first  year ; 

The  names  and  post  office  address  of  the  incorpora- 
tors, with  the  number  of  shares  each  agrees  to  take. 
The  fees  having  been  paid  to  the  Secretary  of  State  and 
the  State  Treasurer,  the  certificate  is  filed  and  recorded 
in  the  office  of  the  Secretary  of  State,  a  copy  of  it  filed 
in  the  office  of  the  clerk  of  the  county  in  which  the  office 
of  the  corporation  is  to  be  located,  and  the  corporation 
may  commence  business  as  soon  as  the  amount  of  capital 
specified  in  its  articles  of  incorporation  as  the  amount  of 
capital  with  which  it  will  begin  business  shall  have  been 
paid  in. 

(b)  In  order  to  be  valid,  a  contract  by  a  corporation 
must  be  authorized  by  the  board  of  directors;  recorded 
in  the  minute  book;  be  executed  by  the  proper  officer  or 
officers,  and  in  the  manner  stated  in  its  by-laws.  It  must 
also  properly  fall  within  the  scope  of  the  business  as  out- 
lined in  its  articles  of  incorporation,  i.  e.,  it  must  not  be 
ultra  vires. 

15.  State  what  facts  must  be  established  to  show  the 
validity  of  an  issue  of  bonds  by  a  municipality. 

(i)  Authorization  by  record  on  municipality  minute 
book. 

(2)  Specified  purpose. 

(3)  Provision  for  redemption  at  maturity. 

(4)  Issue  must  not  work  the  creation  of  an  excess  of 
debt  limit. 


37 


3une  1898^ 

1.  (a)  What  are  the  essential  elements  of  a  sale?  (&) 
What  is  the  effect  of  a  sale  of  goods  in  fraudulent  pos- 
session of  the  vendor?  (c)  What  is  meant  by  a  sale  to 
arrive  and  what  is  the  legal  effect  of  such  a  sale  ? 

(a)  The  essential  elements  of  a  sale  are:  (i)  the  par- 
ties must  be  competent  to  contract;  (2)  they  must  mutual- 
ly assent  to  the  contract  in  the  same  sense ;  (3)  there  must 
be  a  consideration;  (4)  there  must  be  subject  matter  or 
something  sold;  (5)  the  sale  must  conform  to  the  statute 
of  frauds. 

(b)  It  can  be  set  aside. 

(c)  By  a  sale  to  arrive  is  meant  a  sale  of  merchandise 
*'en  route''  before  actual  arrival.  The  sale  is  conditional 
on  the  arrival  of  the  goods,  i.  e.,  if  the  goods  do  not  ar- 
rive there  is  no  sale.  Such  a  sale,  however,  may  be  made 
absolute  if  the  bill  of  lading  be  transferred  by  the  vendor 
to  the.  vendee  as  it  would  indicate  an  intention  on  the 
part  of  the  parties  to  transfer  the  title,  unless  an  express 
agreement  were  made  to  the  contrary. 

2.  Answer  the  following  in  relation  to  a  promissory 
note:  (a)  How  may  the  indorser  be  relieved  from  lia- 
bility? (b)  How  is  the  liability  of  an  indorser  affected 
by  an  arrangement  between  holder  and  maker  extending 
the  time  of  payment?  (c)  How  far  is  an  indorser  holden 
when  the  maker  becomes  insolvent  and  settles  with  his 
creditors  for  50  cents  on  the  dollar  ? 


38 

(a)  The  indorser  is  relieved  from  liability:  (i)  by  in- 
dorsing "without  recourse";  (2)  by  failure  to  receive 
prompt  notice  of  non-payment;  (3)  by  an  arrangement 
between  maker  and  holder  to  extend  the  time  of  payment. 

(b)  He  is  relieved  from  liability. 

(c)  For  the  balance. 

3.  Is  the /validity  of  a  note  or  a  check  affected  by  the 
fact  of  its  being  dated  on  a  legal  holiday?  on  Sunday? 
Explain.  If  the  date  of  a  note  should  be  changed  by  the 
holder,  would  its  validity  be  affected  thereby  ? 

The  validity  of  a  note  or  check  is  not  affected  by  its 
being  dated  on  a  legal  holiday ;  but  if  dated  on  a  Sunday, 
either  would,  according  to  the  strict  letter  of  the  law, 
be  void,  as  all  contracts  entered  into  on  Sunday,  except  into 
for  necessaries  or  works  of  mercy,  are  void.  Still,  in 
practice,  the  date  of  the  performance  or  execution  of  the 
contract  would  probably  be  the  determining  factor. 

Any  alteration  on  the  face  of  a  note  made  by  the  holder 
without  the  consent  of  the  maker  would  make  it  invalid  as 
a  negotiable  instrument. 

4.  (a)  If  A  gives  a  note  to  B  in  payment  of  a  debt, 
and  it  is  indorsed  by  C  as  surety,  can  B  collect  from  C 
if  he  has  not  protested  the  note?  Give  reasons  for  your 
answer. 

(b)  Money  is  obtained  at  a  bank  on  a  note  payable  to 
order;  the  indorsement  is  genuine,  but  the  maker's  name 
is  forged.    On  whom  does  the  loss  fall?    Why? 

(a)  Yes,  because  he  is  not  entitled  to  prompt  demand 
and  notice  of  refusal  like  an  endorser.  If,  however,  C 
can  prove  that,  owing  to  B's  failure  to  make  demand  and 


39 

send  him  prompt  notice  of  non-payment,  he  has  suffered 
loss  which  he  might  have  avoided,  he  is  i^eHeved  from 
liabiHty. 

(b)  The  loss  falls  on  the  endorser  because  he  impliedly 
contracts  with  the  bank  that  the  instrument  is  genuine. 

5.  If  a  man  is  in  the  employ  of  a  firm  and  receives  an 
interest  in  the  profits  in  lieu  of  salary,  is  he  liable  as  a 
partner?  If  he  has  no  salary  but  shares  in  profits  and 
losses,  is  he  a  partner?     Explain. 

No;  because  he  has  no  interest  in  the  capital.  But  if 
he  shares  in  profits  and  losses  he  would  be  held  liable  by 
third  parties  as  a  partner  by  implication,  although  no 
partnership  agreement  existed. 

6.  One  partner  of  a  firm,  who  is  responsible  financially, 
is  in  debt  to  the  firm  beyond  his  right  to  draw  money; 
how  can  said  indebtedness  be  collected  without  dividing 
the  firm?  Can  one  partner  be  sued  by  another  member 
of  the  firm  ?  Could  the  claim  be  assigned  to  a  third  party 
and  collected  by  him? 

He  could  give  his  personal  note  to  an  individual  member 
of  the  firm,  who  could  indorse  it  over  to  the  firm's  attor- 
neys for  collection. 

One  partner  cannot  bring  an  action  at  law  against  an- 
other member  of  the  firm  for  any  act  of  omission  or  com^ 
mission  in  the  partnership  affairs  during  the  continuancie 
of  the  partnership. 

Yes. 

7.  (a)  What  is  meant  by  agency f  (b)  How  should 
an  agent's  authority  be  conferred?     (c)   Has  an  agent 


40 

power  to  delegate  his  authority?  (d)  Has  an  agent  who 
has  sold  goods  for  a  principal  a  right  to  collect  the  amount 
due  for  the  same?  (e)  Mention  and  differentiate  the 
classes  of  agents. 

(a)  Agency  is  the  legal  relation  existing  between  one 
person  who  acts  for  and  represents  another  called  his 
principal. 

(b)  An  agent's  authority  may  be  conferred  by  parol, 
either  orally  or  by  letter.  The  more  formal  way,  however, 
is  to  confer  it  by  power  of  attorney  executed  under  seal. 

(c)  No,  unless  expressly  authorized  by  the  principal, 
or  unless  the  nature  and  usages  of  the  business  require  or 
justify  it. 

(d)  The  right  depends  upon  the  kind  of  agent.  A 
factor  has  the  right  to  collect  from  the  purchaser  unless 
he  has  been  definitely  notified  to  the  contrary,  while  as  a 
general  rule  a  broker  is  not.  The  right  is  largely  influ- 
enced by  custom  and  usage. 

(e)  Agents  may  be  divided  as  follows : 

(i)  Special  and  general;  (2)  limited  and  unlimited; 
(3)   factor  and  broker. 

A  general  agent  is  one  who  is  appointed  to  do  acts  of  a 
class ;  a  special  agent  to  do  individual  acts. 

A  limited  agent  is  bound  by  particular  instructions ;  the 
term  is  applied  to  a  general  agent  whose  authority  is  re- 
stricted and  limited.  An  unlimited  agent  is  a  special  agent 
to  whom  authority  has  been  given  to  use  any  means  he 
may  find  necessary  to  accomplish  the  thing  to  be  done. 

A  factor  is  an  agent  who  has  the  property  of  his  prin- 
cipal in  his  own  possession  for  sale.  A  broker  is  an  agent 
employed  to  negotiate  sales  between  the  buyer  and  seller ; 
the  thing  sold  does  not  usually  pass  into  his  possession. 


41 

It  is  quite  customary,  however,  for  the  same  person  to  be 
factor  and  broker. 

8.  If  an  agent  exceeds  instructions  in  making  a  con- 
tract, can  the  principal  be  held,  always  supposing  that 
the  other  party  to  the  contract  does  not  know  to  what 
extent  the  agent's  powers  are  limited?  Define  precisely 
the  extent  of  a  principal's  liability  for  acts  of  his  agent. 

Yes,  provided  the  act  of  the  agent  comes  within  the 
scope  of  the  agency  business.  As  a  rule  the  principal  is 
liable  for  the  acts  of  a  general  agent — even  though  he 
exceed  the  scope  of  his  authority;  provided  the  acts  be 
such  as  are  customarily  performed  by  a  general  agent  in 
that  particular  line  of  business.  In  the  case  of  a  special 
agent  the  case  would  be  different;  it  is  the  duties  of 
third  parties  to  ascertain  the  precise  extent  of  the  agent's 
authority. 

The  liability  of  a  principal  for  acts  of  his  agent  arises 
(i)  under  the  contract;  (2)  from  the  wrongful  act  of  his 
agent;  and  (3),  by  subsequent  ratification  of  his  unau- 
thorized act. 

(i)  Under  the  contract:  the  principal  is  Hable  for  all 
the  acts  of  his  agent  done  within  the  scope  of  his  au- 
thority. If  the  agent's  authority  be  limited  by  private  in- 
structions, the  principal  will  be  liable  if  he  exceed  them, 
provided  third  parties  have  no  knowledge  of  such  special 
instructions. 

(2)  Wrongful  act  of  agent:  the  principal  is  liable  for 
all  wrongful  and  negligent  acts  of  his  agent — except  where 
he  commits  a  willful  act  of  trespass,  not  within  the  scope 
of  his  authority.  The  willfulness  of  the  act  relieves  the 
principal.  I       J    1 


42 

(3)  Ratification  of  unauthorized  acts:  this  may  be  ex- 
pressly done  by  assent  of  the  principal,  or  may  be  inferred 
from  his  failure  to  disaffirm  and  repudiate  the  acts  of  his 
agent. 

9.  State  what  is  required  to  constitute  a  partnership. 
Define  limited  partnership  and  state  how  it  is  constituted. 

To  constitute  a  partnership  there  must  be  an  agreement 
between  two  or  more  persons  to  combine  their  labor, 
property,  and  skill,  or  some  of  them,  for  the  purpose  of 
engaging  in  some  lawful  trade  or  business,  and  to  share 
the  profits  and  losses,  as  such,  between  them. 

This  agreement  may  be  written  or  oral;  or  it  may  be 
inferred  from  the  acts  of  the  parties. 

A  limited  partnership  exists  where  there  is  at  least  one 
general  partner  who  manages  the  business  and  is  liable 
without  limit  for  all  the  partnership  debts,  and  one  or 
more  special  partners  whose  liability  for  firm  debts  is 
limited  to  the  sum  contributed  by  each  to  the  firm  capital. 
In  order  to  constitute  such  a  partnership  a  certificate  or 
agreement  must  be  properly  executed  by  the  persons  de- 
siring to  unite,  which  must  be  filed  with  the  public  records 
of  the  county  in  which  the  business  is  to  be  transacted. 
The  name  of  the  firm,  nature  of  the  business,  names  of 
the  partners,  and  the  amount  of  capital  contributed  by  each 
should  be  stated.  The  terms  of  the  partnership  should 
also  be  published  in  the  press. 

10.  What  IS  a  factor?  Explain  the  difference  between 
a  factor  and  a  broker. 

A  factor  is  an  agent  who  receives  personal  property 


43 

and  sells  it  for  a  commission.  He  differs  from  a  broker 
in  that  the  property  about  to  be  negotiated  comes  into  his 
possession ;  whereas  this  is  not  the  case  with  the  broker. 

11.  What  is  a  warranty?  What  is  the  rule  of  damages 
for  breach  of  warranty? 

A  warranty  is  a  contract  on  the  part  of  the  seller  to  be 
responsible  for  damage  should  the  property  sold  be  not  as 
represented  and  described;  it  must  be  supported  by  a 
consideration,  and  may  be  either  express  or  implied.  The 
rule  of  damages  for  breach  of  warranty  is  (i)  if  the 
vendee  has  paid  the  price,  he  may  sue  the  vendor  for  the 
damages ;  and  (2)  if  he  has  not  paid  it  he  may  set  up  his 
claim  as  partial  defence  to  any  action  brought  against  him 
for  the  price.  The  measure  of  the  damages  is  generally 
the  difference  between  the  value  of  the  goods  sold  and  the 
value  of  them  had  they  been  as  represented.  The  vendee, 
however,  may  in  special  cases  be  entitled  to  special  dam- 
ages. 

12.  Explain  the  difference  between  an  attorney  in  fact 
and  an  attorney  at  law.  Write  out  a  form  of  power  of 
attorney  to  sign  checks  and  indorse  negotiable  paper. 

An  attorney  in  fact  derives  his  power  to  act  from  the 
letter  or  power  of  attorney  of  his  principal,  by  whom  he 
is  appointed,  while  an  attorney-at-law  is  a  professional 
lawyer,  who  has  passed  certain  prescribed  examinations 
and  has  been  "admitted  to  the  bar." 

FORM  OF  ""power  OF  ATTORNEY.'^ 

Know  all  men  by  these  presents : 

That  T,  John  Brown,  of  Utica,  County  of  Oneida  and 


44 

State  of  New  York,  have  made,  constituted  and  appointed, 
Henry  White,  of  Albany  City,  my  true  and  lawful  attorney 
for  me  and  in  my  name,  place  and  stead,  in  transacting 
any  business  directly  or  indirectly  with  the  Latimer  Ex- 
change Bank,  N.  Y.,  its  officers  or  agents,  to  sign,  indorse, 
draw,  accept,  make,  execute  and  deliver,  all  such  notes, 
checks,  bills  of  exchange,  and  other  contracts  or  instru- 
ments in  writing,  with  or  without  seal,  and  such  verbal 
contracts  as  he  may  deem  proper,  giving  and  granting 
unto  my  said  attorney  full  power  and  authority  to  do  and 
perform  all,  any,  every  act  and  thing  whatsoever  requisite 
and  necessary  to  be  done  in  and  about  the  premises,  as 
fully,  to  all  intents  and  purposes,  as  I  might  or  could  do 
if  personally  present,  with  full  power  of  substitution  and 
revocation,  hereby  ratifying  and  confirming  all  that  my 
said  attorney  or  his  substitute  shall  lawfully  do  or  cause 
to  be  done  by  virtue  hereof;  and  any  such  notes,  checks, 
bills  of  exchange,  contracts  or  instruments,  signed,  in- 
dorsed, drawn,  accepted,  made,  executed  or  delivered  by 
my  said  attorney,  and  which  shall  be  hereafter  received 
by  or  come  to  said  bank  or  its  said  officers  or  agents  shall 
bind,  and  are  hereby  ratified  and  confirmed  by  the  under- 
signed. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and 
seal  the  fifteenth  day  of  February,  in  the  year  one  thous- 
and nine  hundred  and  three. 

Sealed  and  signed  in  presence  of 
John  Doe, 
Richard  Roe.  John  Brown  [seal.] 

13.  Define  usury  and  state  the  penalty  for  usury.  Men- 
tion the  principal  exemptions  from  the  operation  of  the 
usury  law. 


45 

Usury  is  the  taking  of  more  interest  for  the  use  of 
money  than  the  law  allows. 

The  penalty  in  New  York  State  for  usury  is  forfeiture 
of  principal  and  interest. 

The  principal  exceptions  from  the  operation  of  the 
usury  law  are  (i)  pawnbrokers'  loans;  (2)  call  loans  in 
Wall  Street;  (3)  maritime  loans. 

14.  How  may  a  partnership  be  terminated?  What  steps 
should  be  taken  by  a  retiring  partner  to  relieve  himself 
from  further  partnership  responsibility  when  the  business 
is  continued  by  the  former  copartners? 

A  partnership  may  be  terminated  ( i )  by  agreement  of 
all  the  partners;  (2)  by  act  of  one  of  the  partners;  (3) 
by  a  decree  of  a  court ;  (4)  by  operation  of  law. 

He  should,  on  retirement,  notify  all  the  partnership  cus- 
tomers and  creditors  of  the  severance  of  his  connection 
with  the  firm,  and  advertise  the  fact  in  the  public  press. 

15.  When  a  portion  of  the  stock  of  a  corporation  is 
held  by  the  company  and  stands  in  the  name  of  the  treas- 
urer as  trustee,  can  the  treasurer  vote  the  stock  at  an  an- 
nual election  of  directors,  and  if  so,  must  he  vote  it  as 
instructed  by  the  old  board  of  directors? 

Such  stock  could  not  be  voted  on. 


46 


December  1898* 

1.  When  does  a  deed  conveying  real  estate  take  effect? 
Is  there  any  legal  presumption  as  to  the  time  a  deed 
took  effect,  and  if  so,  is  this  presumption  subject  to  re- 
buttal ?-  Give  reasons.    Define  escrow, 

A  deed  conveying  real  estate  takes  effect  upon  delivery 
and  acceptance. 

The  legal  presumption  as  to  the  time  a  deed  took  effect 
is  the  date  of  its  acknowledgment;  but  this  is  subject  to 
rebuttal  because  the  consideration  might  not  have  passed 
until  a  subsequent  date  and  the  deed  not  delivered. 

Escrow  is  the  delivery  of  a  deed  to  a  third  party  to  be 
by  him  delivered  to  the  grantee  upon  the  event  of  certain 
conditions,  upon  which  last  delivery  the  transmission  of 
title  is  complete. 

2.  A  in  Boston  offers  by  letter  a  quantity  of  shoes  at 
a  certain  price  to  B  in  New  York.  B  mails  a  letter  from 
New  York  to  A  in  Boston,  declining  the  offer.  Three 
hours  later  B  in  New  York  telegraphs  A  in  Boston  as 
follows:  "Offer  accepted.  Ship  at  once."  This  tele- 
gram is  received  by  A  two  hours  in  advance  of  B's  letter 
of  declination.    Is  there  a  contract?    Explain  fully. 

There  is  a  contract. 

A  contract  of  sale  consists  of  offer  and  acceptance.  A 
having  received  the  telegram,  and  ignorant  of  the  sending 
of  a  letter  by  B,  is  justified  in  considering  acceptance  com- 
plete, and  in  shipping  the  goods  at  once. 


47 

3-  A  indorses  B's  note  in  favor  of  C  for  $i,ooo.  At 
the  same  time  he  guarantees  in  writing  the  payment  of  a 
note  by  B  to  C  for  the  same  amount.  Neither  note  is  pro- 
tested at  maturity,  and  neither  is  paid  by  B.  C  sues  A 
for  the  amount  of  the  two  notes.  Can  he  recover,  and  if 
so,  how  much  ?    Give  reasons  for  your  answer. 

C  can  recover  $i,ooo  from  A  as  guarantor;  nothing 
from  A  as  indorser. 

C  cannot  recover  from  A  as  indorser  because  he  failed 
to  protest  the  note  and  notify  him  promptly  of  non-pay- 
ment.   Such  omission  relieves  the  indorser  from  liability. 

C  can  recover  $i,ooo  from  A  as  guarantor  because 
usually  a  guarantor  is  not  entitled  to  prompt  notice  of 
such  payment. 

4.  What  rights  and  remedies  have  two  equal  part- 
ners in  a  business  when  they  are  irreconcilably  divided 
as  to  the  management  of  its  affairs? 

(i)  They  may  secure  a  dissolution  by  a  decree  of  a 
court  of  equity  and  the  appointment  of  a  receiver. 

(2)  One  partner  may  assign  the  whole  of  his  interest 
for  value  to  the  other  or  to  a  third  party. 

(3)  They  may  dissolve  the  partnership  by  mutual  con- 
sent, one  of  them  acting  as  liquidator. 

5.  How  must  the  contracts  of  a  corporation  be  made? 
Are  there  any  exceptions  to  the  general  rule?  Explain 
fully. 

Contracts  must  be  made  in  the  manner  laid  down  in  the 
by-laws.  They  must  be  authorized  by  the  board  of  direct- 
ors as  evidenced  by  resolution  duly  recorded. 

This  applies  to  all  contracts  of  importance.    But  the  of- 


48 

ficers  of  the  corporation  are  the  agents  of  the  directors 
and  can  as  a  rule  make  all  contracts  for  the  general  carry- 
ing on  of  business.  Were  this  not  so  the  directors  would 
have  to  be  in  perpetual  session.  It  is  clear  then  that  the 
directors  at  their  meeting  explicitly  (by  resolution)  or 
impliedly  (by  non-dissent)  ratify  the  acts  of  their  agents 
— i.  e.y  the  officers  of  the  corporation. 

6.  What  is  meant  by  stoppage  in  transit  f  Give  an 
example  showing  the  proceedings. 

By  stoppage  in  transit  is  meant  the  right  which  the 
vendor  of  goods  has  to  order  the  carrier  not  to  deliver 
them  to  the  party  previously  directed  (the  vendee),  but  to 
hold  them  subject  to  his  (the  vendor's)  order. 

Example:  A  (vendee)  orders  goods  from  B  (vendor) 
and  directs  them  to  be  shipped  to  him  by  the  American 
Express  Co.  B,  after  dispatching  the  goods,  learns  that 
A  is  in  failing  curcumstances  and  has  allowed  two  notes 
to  go  to  protest.  He  wires  or  writes  to  the  express  com- 
pany not  to  deliver  the  goods  but  to  hold  them  subject  to 
his  order.  The  goods  must  be  in  transit;  and  the  vendor 
must  be  assured  of  the  insolvency  of  the  vendee. 

7.  Explain  what  is  meant  by  the  statement  that  "a 
common  carrier  is  an  insurer  of  goods  entrusted  to  him 
to  be  transported  to  a  designated  destination."  Are  there 
any  qualifications  or  exceptions  to  this  liability?  Give 
reasons  and  full  explanation. 

It  means  that  if  the  goods  entrusted  to  him  for  trans- 
portation are  lost,  destroyed,  or  damaged,  he  may  be  held 
responsible. 
.    An  injury  to  goods  caused  by  the  act  of  God  or  the 


49 

public  enemy  would  exempt  the  carrier  from  his  responsi- 
bility, unless  the  loss  were  caused  by  his  previous  neglect 
in  bringing  the  property  into  danger.  Thus  if  his  delay  ex- 
poses the  property  to  destruction,  or  if  he  take  a  different 
route  from  the  one  agreed  upon,  he  becomes  liable  for  loss. 
The  carrier  may  limit  the  amount  of  his  liability  unless 
the  value  of  the  article  is  stated  by  the  shipper  and  is 
received  with  full  knowledge  of  its  value.  The  carrier 
cannot  limit  his  liability  by  a  printed  notice  unless  the 
attention  of  the  shipper  is  expressly  drawn  to  it. 

8.  Define  arbitration  and  give  the  general  rule  by  which 
the  proceeding  is  governed.  In  what  cases  is  arbitration 
usually  resorted  to?  Wherein  does  an  arbitration  differ 
from  a  reference? 

Arbitration  is  an  agreement  to  submit  a  disputed  claim 
to  the  judgment  of  a  third  party  or  parties  called  arbitra- 
tors, and  to  be  bound  by  their  decision.  The  parties  dis- 
puting may  agree  to  accept  a  third  party — mutually  ac- 
ceptable as  an  arbitrator ;  or  they  may  each  select  a  repre- 
sentative and  agree  that  the  parties  so  selected  shall  agree 
on  an  arbitrator.  The  arbitrator's  decision  is  binding  if 
given  in  the  terms  of  the  contract  submitted  to  him,  and 
this  decision  would  be  a  defence  to  a  suit  in  which  any- 
thing else  was  demanded  on  the  claim.  Either  party  can 
revoke  his  submission  prior  to  the  time  of  the  arbitrator's 
award ;  but  when  the  decision  is  rendered,  it  at  once  be- 
comes binding. 

Arbitration  is  usually  resorted  to  where  it  is  deemed 
desirable  to  save  the  expense  and  delay  of  litigation;  in 
partnership  disputes,  and  in  such  cases  as  labor  strikes, 
etc. 


50 

Arbitration  differs  from  a  reference  in  the  following 
respects :  ( i )  In  an  arbitration,  the  arbitrator  is  selected 
by  the  disputants  themselves,  whereas  the  referee  is  ap- 
pointed by  the  court.  (2)  In  an  arbitration  either  party 
may  revoke  his  submission  prior  to  the  arbitrator's  de- 
cision, whereas  in  a  reference — when  once  entered  on, 
neither  party  can  withdraw  previous  to  the  referee's  de- 
cision without  being  non-suited.  (3)  The  arbitrator  is 
both  jury  and  judge,  while  the  referee  simply  takes  the 
testimony  and  reports  to  the  judge  by  whom  he  is  appoint- 
ed, for  a  decision  in  the  case. 

9.  What  is  a  broker?  What  is  meant  by  the  terms 
bought  note  and  sold  note?  Illustrate,  and  show  to  what 
extent  such  notes  are  used. 

A  broker  is  an  agent  who  acts  on  behalf  of  another 
person  in  buying  or  selling.  He  is  an  intermediary  be- 
tween two  parties :  the  buyer  and  the  seller.  In  general 
there  are  two  classes  of  agents :  factors  and  brokers ;  the 
distinction  being  generally  that  in  the  case  of  factors  the 
goods  of  his  principal  come  into  his  possession,  whereas 
this  is  not  the  case  with  brokers.  It  often  happens,  how- 
ever, that  an  agent  is  both  factor  and  broker. 

"Bought"  and  "sold"  notes  are  the  records  of  a  transac- 
tion which  a  broker  who  has  carried  out  the  transactions 
on  behalf  of  one  or  both  parties  sends  to  the  principals. 
The  record  which  he  sends  to  the  purchaser  is  called  the 
bought  note,  and  that  which  he  sends  to  the  seller  the  sold 
note.    There  are  three  varieties  of  bought  and  sold  notes. 

(i)  "Sold  for  you  to  C.  D.,"  or  "Bought  for  you  from 
A.  B."  These  notes  are  signed  by  the  broker  with  the 
work  "Broker"  after  his  signature.    As  the  principals  are 


SI 

disclosed,  the  broker  can  neither  sue  nor  be  sued  on  such 
a  contract. 

(2)  "Sold  for  you"  or  "Bought  for  you."  The  broker 
signs  his  name  with  "Broker"  afterwards.  As  he  has 
signed  as  broker  he  can  neither  sue  nor  be  sued  on  the  con- 
tract. 

(3)  "Sold  to  you  by  me"  or  "Bought  of  you  by  me." 
This  is  signed  by  the  broker  without  adding  the  word 
"Broker."  Here  the  broker  has  assumed  the  position  of 
principal,  and  as  such  can  sue  and  be  sued.  All  stock 
exchange  transactions  and  wherever  a  broker  is  made  use 
of  to  buy  or  sell  are  evidenced  by  these  notes. 

10.  What  is  meant  by  ultra  vires  in  regard  to  the  act 
of  a  corporation  ?  Explain,  and  give  an  example  of  such 
an  act. 

Ultra  vires  means  "beyond  the  strength"  or  "outside 
of  the  power  of."  Any  contract  made  by  a  corporation 
involving  ventures  outside  of  and  not  within  the  scope 
or  powers  given  by  its  charter  would  be  said  to  be  ultra 
vires. 

The  articles  of  incorporation  of  every  corporation  must 
set  forth  the  purpose  or  purposes  for  which  it  is  to  be 
formed,  i.  e.,  the  nature  of  the  business  it  proposes  to  en- 
gage in.  It  may  not  engage  in  any  business  foreign  to 
this.    If  it  does  it  acts  ultra  vires. 

It  has  been  decided  (Nat.  Park  Bank  v.  G.  A.  M.  W. 
and  S.,  116  N.  Y.,  281)  that  a  manufacturing  corpora- 
tion has  no  power  to  endorse  accommodation  notes. 
Should  it  do  so,  the  act  would  be  ultra  vires. 

11.  When  the  capital  of  a  corporation  is  legally  in- 


52 

creased,  have  the  old  stockholders  any  pre-emptive  right 
to  purchase  the  new  stock?    Give  reasons. 

They  have. 

The  capital  of  a  corporation  can  only  be  increased  by 
the  consent  of  all  or  a  majorty  of  the  stockholders.  By 
withholding  or  giving  their  consent  they  are  able  to  enforce 
this  right.  The  right  to  subscribe  for  or  purchase  such 
stock,  particularly  in  the  case  of  a  corporation  doing  a 
flourishing  business,  is  sometimes  very  valuable. 

12.  What  is  a  receiver?  What  is  his  first  duty  on  tak- 
ing possession  of  property  or  trust  funds  committed  to 
his  care  ?  Give  reasons  and  illustrations.  How  should  he 
deposit  trust  funds  in  a  bank?     Illustrate. 

A  receiver  is  a  person  appointed  by  a  judge  of  a  court 
of  law  to  take  charge  of  property  where  the  interests  of 
third  parties  are  likely  to  be  injured.  After  he  has  been 
appointed  and  his  bond  filed,  he  should  give  notice  of 
his  appointment  by  publication  and  advertise  for  the 
payment  to  him  of  all  monies  due  the  estate  and  for  the 
presentation  to  him  of  all  claims.  He  should  then  have 
the  property  insured  and  appraised  and  deposit  all  funds 
in  a  bank  in  his  own  name  as  receiver: 

e.  g.  John  Brown, 

Receiver  for  Smith  &  Martin. 

13.  What  is  meant  by  the  rule  hearsay  evidence  is  ex- 
cluded? Illustrate.  State  the  rule  as  to  the  admission 
of  books  of  acount  as  evidence  in  court.     Explain. 

*'Hearsay"is  the  evidence  not  of  what  the  witness  knows 
himself,  but  of  what  he  has  heard  from  others.     Such 


53 

evidence  derives  its  value  from  the  credit  to  be  given  to  the 
veracity  and  competency  of  some  other  person  and  is 
merely  a  recital  or  assertion.  It  is  excluded  for  two  rea- 
sons :  ( I )  Because  the  party  making  such  declarations  is 
not  under  oath;  and  (2)  because  the  party  against  whom 
it  operates  has  no  opportunity  of  cross-examination. 

A  witness  stating  that  he  had  heard  Mr.  So-and-so  say 
that  he  had  heard  certain  statements  made  would  be  met 
with  "I  object"  on  the  part  of  counsel  and  told  to  confine 
his  testimony  to  matters  of  personal  knowledge. 

Books  of  account  are  not  evidence  per  se,  i.  e.,  the 
mere  production  of  a  ledger  with  charges  and  credits 
showing  a  balance  due  by  defendant  to  plaintiff  would  not 
be  evidence  in  itself,  but  only  as  substantiated  by  collateral 
evidence,  such  as  the  books  of  original  entry,  correspon- 
dence, shipping  receipts,  etc.,  supported  by  the  testimony 
of  the  writers  under  oath. 

14.  Where  in  New  York  must  a  corporation  file  the 
annual  report  required  by  law?  What  must  this  report 
contain?  What  remedy  has  a  director  when  the  annual 
report,  despite  his  protest,  has  not  been  filed?  What  is 
the  penalty  for  failure  to  file  an  annual  report  ? 

The  annual  report  must  be  filed  in  the  office  of  the 
Secretary  of  State  in  Albany. 
The  report  must  contain: 

( 1 )  The  amount  of  its  capital  stock  and  the  proportion 
actually  issued. 

(2)  The  amount  of  its  debts  or  an  amount  which  they 
do  not  exceed. 

(3)  The  amount  of  its  assets  or  an  amount  which  its 
assets  at  least  equal. 


54 

The  duty  of  making  and  filing  the  annual  report  has 
been  transferred  from  the  directors  to  the  executive  offi- 
cers of  the  corporation.  Any  officer  who  fails  to  file  the 
annual  report  after  being  requested  in  writing  by  a  stock- 
holder or  creditor  becomes  liable  to  a  fine  of  $50  a  day 
as  a  penalty  for  every  day  he  delays. 

15.  A  policy  of  insurance  contains  a  clause  exempting 
the  company  from  liability  if  the  insured  premises  remain 
idle  or  vacant  20  days  without  the  permission  of  the  com- 
pany indorsed  in  writing  on  the  policy.  A  policy  holder 
applies  to  the  agent  who  issued  the  policy  for  such  per- 
mission, and  the  agent  gives  permission  orally,  saying 
that  the  written  consent  of  the  company  is  not  necessary. 
The  insured  building  burns.  The  owner  sues  the  com- 
pany. In  whose  favor  should  judgment  be  rendered? 
Why? 

What  is  the  duty  of  an  executor  in  regard  to  policies 
covering  property  of  the  testator? 

The  judgment  should  be  rendered  in  favor  of  the  in- 
surance company,  because  the  extent  of  the  agent's  author- 
ity was  in  this  respect  stated  in  the  policy,  and  it  was  the 
duty  of  the  insured  to  have  read  his  policy.  Had  he  done 
so  he  could  have  ascertained  the  precise  limits  of  the 
agent's  authority  in  this  respect  and  have  known  that  as 
he  was  exceeding  his  stated  powers  he  could  not  bind  his 
principal,  the  insurance  company. 

All  existing  policies  should  be  transferred  to  his  own 
name  as  executor,  and  all  new  ones  taken  out  in  the  same 
way. 


55 


June  1 89a 

1.  What  is  an  account  stated?  To  what  extent  is  it 
conclusive  ?  Does  the  mere  rendering  of  an  account  make 
it  an  account  stated?  On  what  grounds  may  an  account 
stated  be  opened  ? 

An  account  stated  is  an  account  rendered  by  one  party 
(the  creditor)  to  another  (the  debtor)  and  accepted  by 
him  as  correct.  This  acceptance  may  be  expressly  stated ; 
but  if  the  debtor  fails  to  object  within  a  reasonable  time 
his  assent  to  the  correctness  of  the  account  will  be  im- 
plied by  law. 

It  is  conclusive  upon  the  debtor  and  creditor  as  to  the 
accuracy  of  the  items  in  the  statement  without  further 
proof. 

The  mere  rendering  of  an  account  does  not  make  it  an 
account  stated,  because  the  debtor  may  refuse  to  assent 
to  the  correctness  of  the  items,  or  it  may  be  rendered  by 
the  creditor  (E.  O.  E.)  (errors  and  omissions  excepted). 
To  make  it  an  account  stated  the  statement  must  be  ac- 
cepted by  the  debtor  as  correct. 

An  account  stated  may  be  opened  where  the  party  ob- 
jecting can  show  fraud,  mistake  or  palpable  error. 

2.  After  how  many  years  is  a  mutual  account  between 
merchants  barred?  When  does  the  statute  of  limitations 
begin  to  run? 

A  mutual  account  between  merchants  is  barred  by  the 
statute  of  limitations  after  six  years.    The  statute  of  lim- 


56 

itations  begins  to  run  from  the  date  of  the  last  item  on 
either  the  debit  or  credit  side  of  the  account. 

3.  A  makes  a'  bond  and  mortgage  and  afterward  trans- 
fers the  mortgaged  property  to  B.  As  the  mortgage  ap- 
proaches maturity  B  applies  to  the  holder  of  the  mortgage 
for  an  extension  of  the  time  payment.  Will  the  granting 
of  such  an  extension  affect  the  liability  of  A  on  his  bond, 
and  if  so,  in  what  way  ? 

The  granting  of  such  an  extension  of  time  will  relieve 
A  from  his  liability,  because  any  extension  of  time  made 
without  the  consent  of  the  guarantor  or  surety  relieves 
him  from  liability. 

4.  What  is  a  contract?  On  what  is  a  contract  founded? 
State  the  difference  between  an  express  contract  and  an 
implied  contract.  What  certain  conditions  are  requisite 
to  the  validity  of  an  express  contract? 

A  contract  is  an  agreement  between  two  or  more  parties 
to  do  or  not  to  do  something  for  a  consideration. 

It  is  founded  upon  an  offer  and  acceptance  to  do  or  not 
to  do  something  in  the  same  sense. 

In  an  express  contract  the  offer  and  acceptance  are  made 
either  in  writing  or  orally;  in  an  implied  contract  they 
are  inferred  from  the  acts  of  the  parties  contracting. 

The  conditions  requisite  to  the  validity  of  an  express 
contract  are:  There  must  be  subject  matter,  i.  e.,  some- 
thing agreed  to  be  done  or  not  to  be  done;  the  parties 
must  give  their  consent ;  they  must  be  legally  competent ; 
there  must  be  consideration. 

5.  How  is  a  pledge  of  stock  usually  made?  Must  the 
pledgee   return   to   the   pledger   the   identical   certificate 


57 

representing  the  stock  pledged?     Has  the  pledgee  the 
right  to  sell  or  repledge  the  stock  ? 

The  stock  certificates  are  endorsed  in  blank  and  de- 
livered by  the  pledgor  to  the  pledgee.  A  written,  signed 
memorandum  to  the  effect  that  the  stock  is  held  in  pledge 
is  generally  handed  to  the  pledgor,  a  copy  of  which  is 
attached  to  the  stock  certificate. 

No ;  not  necessarily. 

The  pledgee  has  the  right  to  sell  or  repledge  the  stock 
provided  he  keeps  "under  his  control,"  i.  e.,  "in  his  pos- 
session" other  securities  of  a  like  kind  and  amount  (Dou- 
glas &  Jones  vs.  Carpenter,  17  App.  Div.,  N.  Y.,  329). 

6.  State  completely  the  law  in  respect  to  the  application 
of  payments  made  on  account,  where  there  are  several 
distinct  debts  or  evidences  of  debt. 

The  debtor,  on  paying,  has  the  right  to  stipulate  against 
which  debt  his  payment  is  to  be  placed.  If  he  fails  to  do 
this,  the  creditor  may  appropriate  the  payment  according 
to  his  own  wishes.  If  neither  debtor  nor  creditor  appro- 
priates, the  law  will  do  so  in  such  a  way  as  will  do  justice 
to  all  parties. 

7.  Mention  several  different  ways  in  which  a  partner- 
ship may  be  dissolved.  What  effect  has  a  dissolution  on 
the  property,  interest  in  the  joint  stock,  or  joint  rights 
of  the  partners,  or  on  their  powers  over  old  debts  due  to 
them  or  by  them? 

A  partnership  may  be  dissolved:  (a)  by  agreement 
of  all  the  partners;  (b)  by  act  of  one  of  the  partners,  i.e., 
by  assigning  all  his  interest,  or  in  some  affirmative  way 


58 

renouncing  the  contract;  (r)  by  a  decree  of  account  on  | 

any  of  the  following  grounds:  i 

( 1 )  Improper  or  fraudulent  conduct  on  the  part  of  one  ; 
or  more  of  the  partners.  ! 

(2)  Violation  of  the  articles  of  co-partnership. 

(3)  The  exclusion  of  a  partner  from  his  proper  share 

in  the  management.  ^ 

(4)  Continued  quarreling  amongst  the  partners.  ^ 

(5)  Intemperance,  dissipation  or  gross  immorality.  j 

(6)  Inability  of  a  partner  from  any  cause  to  perform  j 
his  part  of  the  contract.  i 

'» 

(d)  By  operation  of  law,  e.  g. 

(i)   Death  of  a  partner.  , 

(2)  Insanity  or  imbecility  of  a  partner.  i 

(3)  Sale  of  a  partner's  interest  on  execution  against       ; 
him. 

(4)  Bankruptcy  of  a  partner.  1 

(5)  Breaking  out  of  war  between  the  countries  where 
the  partners  reside. 

(6)  Any  event  happening  which  severs  unity  of  in-       i 
terest. 

A  dissolution  of  partnership  has  no  effect  upon  the      -i 
firm  property.    The  joint  agency  of  the  partners  ceases; 
they  may  simply  bind  each  other  as  all  Joint  debtors  or 
joint  creditors  may. 


8.  By  what  means  and  to  what  extent  may  a  retiring 
partner  terminate  his  liability  for  the  debts  of  the  partner- 
ship so  that  such  liability  shall  attach  to  no  new  obliga- 
tions ?  How  may  he  escape  from  his  liabilities  for  exist- 
ing obligations  ? 


59 

By  giving  notice  in  writing  and  by  advertising  the  fact 
of  his  retirement  to  the  creditors  and  the  public  generally 
he  may  limit  his  liability  so  that  he  may  not  be  held  re- 
sponsible for  any  debts  incurred  by  the  firm  subsequent 
to  his  retirement. 

By  agreement  with  any  incoming  partner  or  by  agree- 
ment with  the  remaining  partner  or  partners  that  they 
shall  pay  all  firm  debts  for  a  consideration  he  may  appar- 
ently escape  liability  for  existing  obligations,  but  in  order 
to  be  binding  as  against  creditors  they  (the  creditors) 
would  have  to  give  their  consent  to  the  arrangement. 
So  long  as  the  liabilities  were  paid  the  creditors  would 
make  no  objection;  but  should  the  new  firm  be  unable  to 
pay  in  full  for  any  reason,  then  the  retired  partner  could 
still  be  held,  unless,  as  before  said,  the  creditors  had  as- 
sented to  the  arrangement. 

9.  Distinguish  between  general  and  special  agents.  To 
what  extent  is  the  principal  bound  by  the  act  of  his  agent? 
Must  third  parties,  for  their  own  protection,  ascertain  the 
agent's  authority?  Is  the  authority  of  a  general  agent 
unlimited?  To  what  extent  is  the  authority  of  an  agent 
affected  by  usage  or  custom  ? 

A  general  agent  is  one  appointed  to  perform  for  his 
principal  acts  of  a  class ;  a  special  agent,  specific  acts. 

The  principal  is  bound  by  any  act  of  his  agent  within 
the  scope  of  his  authority.  If  the  agent  exceeds  his  au- 
thority, but  the  act  be  such  as  is  customary  for  a  general 
agent  to  perform  in  that  particular  line  of  business,  and 
third  parties  are  acting  in  good  faith,  having  no  informa- 
tion as  to  the  extent  of  the  agent's  authority,  the  principal 
will  still  be  bound;  for  it  will  be  generally  supposed,  in 


6o 

the  absence  of  specific  instructions  to  the  contrary,  that 
the  general  agent  possesses  authority  to  perform  all  the 
acts  customary  for  a  general  agent  to  perform  in  that 
particular  line  of  business. 

Third  parties  should,  in  the  case  of  special  agents,  al- 
ways ascertain  the  precise  extent  of  the  agent's  power; 
because  he  cannot  bind  his  principal  by  any  act  outside  of 
his  specified  authority.  In  the  case  of  general  agents  it 
would  alway  be  wise  for  third  parties  to  ascertain  the 
agent's  authority. 

The  authority  of  a  general  agent  is  limited  (a)  by  the 
authority  conferred  on  him  by  his  principal,  and  (b)  by 
usage  and  custom. 

It  is  always  supposed  that  a  general  agent  possesses 
all  the  authority  to  perform  those  acts  which  it  is  the  cus- 
tom and  usage  for  a  general  agent  in  any  particular  line 
of  business  to  possess. 


10.  In  taking  the  accounts  of  a  firm,  state  the  principles 
which  determine  whether  a  given  expense  or  loss  is  to  be 
placed  to  the  debit  of  the  firm  or  to  the  debit  of  one  or 
more  of  the  partners  separately. 


If  the  expense  or  loss  be  incurred  through  breach  of 
duty  of  a  party,  by  fraud,  negligence,  ignorance,  or  ex- 
travagance, whether  by  design  or  not,  the  expense  or  loss 
may  be  charged  to  that  party ;  the  partnership  cannot  le- 
gally be  asked  to  contribute  to  it.  For  an  honest  mistake 
in  judgment,  however,  unless  it  amounted  to  gross  negli- 
gence or  ignorance,  a  partner  could  not  ordinarily  be  held 
personally  liable  by  the  partnership. 


6i 

11.  State  the  powers  and  interests  of  surviving  part- 
ners in  a  business. 

A  partnership  is  dissolved  upon  the  death  of  a  partner, 
and  the  possession  of  firm  property  and  its  management 
for  the  purpose  of  winding  up  affairs  is  vested  exclusively 
in  the  surviving  partners,  who  are  said  to  be  tenants  in 
common  with  the  representatives  of  the  deceased  partner 
as  to  the  firm  effects,  but  not  as  to  possession.  The  sur- 
viving partners  are'trustees  for  the  representatives  of  the 
deceased,  for  firm  creditors,  and  for  themselves. 

It  is  their  duty  to  settle  up  matters  without  unnecessary 
delay  in  the  best  manner  for  all  interested.  They  are  held 
strictly  to  account  for  their  transactions  by  courts  of 
equity. 

12.  State  the  rule  of  interest  applicable  where  partial 
payments  are  made. 

In  the  absence  of  any  express  agreement  the  rule  is, 
first,  apply  the  payments  to  the  discharge  of  accrued  in- 
terest ;  the  balance,  if  any,  to  the  account  of  the  principal. 
The  principal  is  never  mcreased  by  the  addition  to  it  of 
unpaid  balances  of  interest. 


13.  What  property  may  a  corporation  receive  in  pay- 
ment for  its  shares  of  stock  ? 


A  corporation  may  receive  in  payment  for  its  shares 
of  stock,  money,  labor,  or  property  actually  received  for 
its  use  and  lawful  purposes  authorized  by  its  certificate 
of  incorporation  or  required  for  its  use. 

In  the  absence  of  fraud  in  the  transaction  the  judgment 


62 

of  the  directors  as  to  the  value  of  the  property  pur- 
chased is  conclusive. 

14.  Are  stock  dividends  which  represent  the  accumu- 
lated earnings  or  profits  of  a  corporation,  income  or  cap- 
ital in  this  state  as  between  life-tenant  and  remainder- 
man ?     Explain. 

If  earned  or  accrued  before  the  life  estate  arose,  without 
reference  to  the  time  when  declared  or  made  payable, 
they  are  held  to  be  principif  and  to  belong  to  the  body  of 
the  estate.  But  if  it  is  found  that  the  fund  out  of  which 
the  dividend  was  paid  accrued  or  was  earned  after  the 
life  estate  arose,  then  it  is  held  that  the  dividend  is  in- 
come and  belongs  to  the  tenant  for  life. 

15.  As  between  life-tenant  and  remainder-man,  is  a  div- 
idend declared  but  not  paid  during  the  lifetime  of  a  tes- 
tator to  be  treated  as  capital  or  income?    Give  reasons. 

Such  a  dividend  belongs  to  the  body  of  the  estate  as 
capital.  It  was  a  chose  in  action  at  the  time  of  testator's 
death  just  as  much  as  an  account  or  note  receivable. 

Again,  when  a  dividend  is  declared,  it  becomes  separate 
from  the  other  corporation  assets,  and  is  set  aside  for  the 
use  of  stockholders  of  record. 


63 


3anuari?  1900* 

I.  Give  illustrations  of  the  following  kinds  of  indorse- 
ment of  a  promissory  note :  In  blank,  special,  restrictive, 
protest  waived,  qualified.  Explain  the  legal  effect  of 
each. 

When  the  payee  endorses  by  simply  writing  his  name 
across  the  back  of  a  note  it  is  called  a  blank  indorsement. 
It  is  transferrable  by  mere  delivery  the  same  as  if  made 
payable  to  bearer. 

Blank  Indorsement.  "Fred'k  S.  Tipson/^ 

Supposing  the  note  is  payable  to  me  a  special  indorse- 
ment would  be  "Pay  to  John  Brown  or  order  Fred'k  S. 
Tipson." 

A  restrictive  indorsement  might  take  one  of  three 
forms : 

( 1 )  "Pay  to  John  Brown  only — Fred'k  S.  Tipson." 

(2)  "Pay  to  John  Brown  for  collection — Fred'k  S. 
Tipson." 

(3)  "Pay  to  John  Brown  for  the  account  of  William 
Smith. — Fred'k  S.  Tipson.'' 

It  will  be  noticed  that  in  each  case  the  indorsement 
restricts  the  full  and  free  negotiation  of  the  paper  there- 
after. 

Where  ''protest  waived''  is  inserted  all  indorsers  are 
bound  by  the  agreement  to  surrender  their  right  to  prompt 
notice  of  non-payment. 

A  qualified  indorsement  usually  consists  in  adding 
"without  recourse"  to  the  signature  of  the  indorser.   Such 


64 

indorsement  does  not  aiTect  the  further  negotiation  of  the 
paper,  but  it  does  relieve  the  indorser  from  all  liability  to 
pay  the  paper  if  prior  parties  do  not. 

2.  Will  the  devise  or  assignment  of  all  the  rights,  etc., 
of  a  partner  make  the  legatee  or  assignee  a  partner  ?  Ex- 
plain. 

It  will  not.  Partnership  results  from  an  agreement 
between  two  or  more  parties,  and  no  legatee  or  assignee 
can  become  a  partner  without  the  consent  and  agreement 
of  the  remaining  partner  or  partners. 

3.  Can  a  partner  buy  a  debt  against  his  firm?    Explain. 

Not  usually,  as  it  would  result  in  the  establishment  of 
inconsistent  relationships.  Again,  supposing  he  had  to 
sue  for  the  debt,  as  partners  are  only  recognized  as  in- 
dividuals in  law,  he  would  have  to  sue  himself  as  a  mem- 
ber of  the  firm ! 

4.  In  what  way  does  a  deed  become  operative  ? 

A  deed  becomes  operative  by  execution  and  delivery. 

5.  State  when  the  statute  of  limitations  begins  to  run 
(a)  on  a  note  payable  on  demand,  (&)  on  a  note  payable 
on  a  day  certain  or  at  a  particular  period  after  date,  {c) 
on  goods  sold  and  delivered  without  any  agreement  as 
to  credit,  {d)  on  mutual  accounts. 

(a)  The  date  of  the  note. 

{h)   From  the  due  date. 

{c)   From  the  date  of  the  bill. 


6s 

(d)  From  the  date  of  the  latest  entry  on  either  side  of 
either  account. 

6.  By  whom  must  a  certificate  of  incorporation  of  a 
stock  company  be  executed?  State  the  minimum  num- 
ber of  incorporators  required.  What  is  the  limitation  as 
to  number  of  directors?  May  corporations,  copartner- 
ships, minors  and  persons  acting  in  a  representative  ca- 
pacity be  incorporators? 

It  must  be  executed  by  the  incorporators. 

The  minimum  number  is  three.  There  is  no  limitation 
as  to  the  number  of  directors,  but  the  minimum  is  three. 

They  may  not ;  incorporators  must  be  "natural  persons 
of  full  age." 

7.  Has  a  special  partner  prior  right  over  other  partners 
in  distribution  of  capital  surplus  on  the  winding  up  of  the 
firm?  Are  his  rights  subordinate  to  those  of  all  other 
creditors  ?    Why  ? 

He  has  no  inherent  right  in  such  distribution,  but  he 
may  make  such  an  agreement  with  the  general  partners 
as  to  the  distribution  of  capital  surplus  in  the  event  of  a 
wind-up. 

His  rights  are  subordinate  to  those  of  all  other  creditors 
because  he  is  liable  to  them  for  the  full  amount  of  capital 
contributed  by  him.  He  is  not  entitled  to  anything  until 
the  creditors  are  paid  in  full. 


8.  To  whom  does  the  right  of  stoppage  in  transit  be- 
long? Under  what  circumstances  may  this  right  be  ex- 
ercised?   When  does  the  right  of  stoppage  cease? 


66 

The  right  of  stoppage  belongs  to  the  vendor.  Insol- 
vency of  the  buyer  and  all  or  a  portion  of  the  purchase 
price  unpaid  would  be  sufficient  grounds  for  exercising 
the  right. 

On  payment  of  the  purchase  price  or  on  delivery. 

9.  Within  what  period  must  an  action  be  brought  in 
the  case  of  (a)  instruments  under  seal,  (b)  written  con- 
tracts not  under  seal,  (c)  unwritten  contracts,  (d)  per- 
sonal injury  resulting  from  negligence? 

(a)  Twenty  years. 

(b)  Six  years. 

(c)  Six  years. 

(d)  Two  years. 

10.  How  is  an  agent's  authority  derived  from  his  prin- 
cipal? Where  the  acts  to  be  performed  by  the  agent 
could  not  be  performed  by  the  principal  except  by  an  in- 
strument under  seal,  what  is  required? 

An  agent's  authority  is  desired  from  his  principal  by 
appointment  by  letter,  orally,  or  by  power  of  attorney  un- 
der seal. 

An  agent  must  be  appointed  by  power  of  attorney  under 
seal  where  his  acts  could  only  be  performed  under  seal 
by  his  principal. 

11.  On  the  death  of  a  partner,  what  right  have  his  rep- 
resentatives to  the  firm  property? 

His  representatives  have  no  right  to  the  firm  property, 
nor  can  they  interfere  in  the  management  of  firm  affairs. 


67 

They  have  not  even  the  right  to  examine  the  partnership 
books  to  ascertain  the  interest  of  the  deceased  unless  by 
special  order  of  court.  It  is  the  duty  of  the  surviving 
partners  to  wind  up  partnership  matters  and  to  account  to 
deceased's  representatives,  paying  to  them  the  amount 
realized  for  his  interest.  If  dissatisfied,  deceased's  repre- 
sentatives may  demand  a  formal  accounting  under  a  court 
order. 

12.  What  constitutes  an  insurable  interest  in  property? 

Such  an  interest  as  would  suflfer  by  damage  happening 
to  or  destruction  of  the  property. 

13.  On  the  dissolution  of  a  corporation  in  whom  does 
the  title  to  the  corporate  property  vest?  To  whom  is 
such  title-holder  responsible? 

The  title  vests  in  the  trustees,  i.  e.,  the  directors,  unless 
other  persons  shall  be  appointed  by  the  legislature  or  by 
some  court  of  competent  jurisdiction. 

They  are  responsible  to  the  creditors  and  stockholders. 

14.  When  a  partial  payment  is  made,  is  it  applied  in 
the  first  instance  to  the  discharge  of  the  accrued  interest 
or  of  the  principal?  If  the  payment  is  less  than  the  ac- 
crued interest,  how  is  subsequent  interest  computed? 

It  is  applied  in  the  first  instance  to  the  discharge  of  the 
accrued  interest.  On  the  balance  of  principal  on  which 
accrued  interest  was  not  paid.  The  principal  is  never 
increased  by  adding  to  it  any  unpaid  balance  of  interest 
as  a  basis  of  further  interest. 


68 

15.  What  is  the  meaning  of  the  term  escrow  when  ap- 
plied to  deeds  ?    When  does  a  deed  in  escrow  take  eflf ect  ? 

Where  a  deed  is  given  by  the  maker  (the  obligor)  to 
a  third  party  to  be  delivered  to  the  obligee  upon  the  ful- 
fillment of  certain  conditions  or  the  happening  of  a  certain 
event,  the  deed  while  so  held  is  said  to  be  in  escrow,  that 
is,  it  is  a  mere  scroll  or  writing  and  not  a  contract  obli- 
gation. 

A  deed  in  escrow  takes  effect  after  delivery  to  the 
obligee  from  the  date  of  its  delivery  by  the  maker  (the 
obligor)  to  the  third  party. 


69 


3une  1900* 

I.  State  the  general  rule  governing  the  interpretation 
of  contracts.    Mention  any  exception  to  this  rule. 

The  mutual  assent  of  the  parties  to  the  terms  of  a  con- 
tract is  what  contracts  derive  their  force  from.  The  in- 
terpretation of  the  contract,  then,  is  governed  by  the  in- 
tention of  the  parties  at  the  time  they  entered  into  the 
agreement.  The  parties  must  have  assented  to  the  same 
thing  in  the  same  sense  or  there  is  no  contract. 

Where  either  party's  acts  is  inconsistent  with  his  alleged 
expressed  intention  in  the  contract,  his  intentions  at 
the  time  will  be  interpreted  by  his  acts  instead  of  his 
words. 


2.  Describe  the  acts  necessary  to  fix  the  responsibility 
of  the  drawer  and  indorsers  of  negotiable  paper  and  men- 
tion the  omissions  which  will  operate  to  discharge  the 
drawer  or  indorsers. 


To  fix  their  responsibility  the  instrument  must  be  in 
writing,  must  be  signed,  payable  in  money  on  or  before 
a  fixed  time,  and  delivered. 

They  are  discharged  from  liability  if  presentation  for 
payment  be  not  made  when  due.  Forgery  invalidates  the 
instrument  entirely.  Endorsers  are  discharged  if  they  do 
not  receive  prompt  notice  of  non-payment,  as  also,  if  an 
extension  of  time  is  granted  to  the  maker. 


70 

3-  Does  a  judgment  when  docketed  have  preference 
over  an  existing  unrecorded  mortgage?  State  the  prin- 
ciple of  law  involved. 

It  does. 

Between  mortgagor  and  mortgagee  a  mortgage  is 
perfectly  valid  though  unrecorded.  But  for  the  pro- 
tection of  third  parties  the  law  declares  that  mortgages 
must  be  recorded.  The  judgment  would  have  the  prefer- 
ence here,  because  the  requirements  of  the  law  as  to  re- 
cording have  not  been  complied  with. 

4.  State  the  essential  feature  of  a  partnership.  Must 
each  partner  have  an  interest  in  both  profits  and  losses? 

The  essential  feature  of  a  partnership  is  the  agreement 
to  share  the  profits  in  a  certain  proportion. 

The  partners  may  make  any  agreement  they  like 
amongst  themselves  as  to  the  sharing  of  profits  and  losses. 
They  must  share  profits ;  but  it  may  be  that  one  or  more 
partners  may  be  held  exempt  from  sharing  in  the  losses. 
But  no  such  agreement  will  prevent  such  a  partner  from 
being  liable  for  the  debts  of  the  partnership,  unless  the 
creditor  knew  of  this  agreement  between  the  partners 
when  the  debt  was  contracted. 

5.  What  law  governs  as  to  questions  arising  under  a 
will  disposing  of  personalty  and  realty  in  various  dif- 
ferent States? 

As  to  personalty,  the  law  of  the  State  in  which  the  per- 
son resided  will  govern ;  as  to  realty,  the  law  of  the  State 
in  which  the  property  is  situated. 


71 

6.  Where  a  valid  debt  exists  for  a  certain  sum  of  money 
does  a  receipt  for  a  less  sum  specifying  that  it  is  ''in  full 
of  the  debt"  or  ''of  all  demands''  debar  the  creditor  from 
collecting  the  amount  unpaid?     Explain. 

It  does  not.  The  agreement  to  accept  less  than  the  full 
amount  of  a  valid  debt  is  a  new  contract  and  would  be 
voidable  for  want  of  consideration.  The  debtor  should 
give  something  of  value  as  a  consideration  for  the  release 
of  the  balance  of  the  debt,  or,  preferably,  get  a  release  un- 
der seal,  which  is  said  to  "import''  a  consideration. 

7.  A  and  B  are  partners.  Can  B,  on  the  death  of  A, 
sell  the  firm  property  and  give  good  title  thereto?  Ex- 
plain. 

He  can. 

B,  on  the  death  of  A,  becomes  tenant  in  common 
of  the  firm  property  with  A's  representatives,  and 
trustee  for  himself,  the  firm  creditors  and  A's  representa- 
tives. It  is  his  business  to  wind  up  the  firm  affairs,  realize 
on  the  assets,  and  liquidate  the  liabilities.  He  is  entitled, 
therefore,  to  sell  the  firm  property,  but  must  account  to 
A's  representatives  for  the  proceeds  and  obtain  the  sanc- 
tion of  a  court  of  equity. 

8.  When  does  the  title  pass  to  the  purchaser  (a)  under 
a  contract  of  sale;  (b)  when  goods  are  manufactured  on 
order?  Mention  two  of  the  grounds  on  which  a  contract 
of  sale  may  be  voided. 

(a)  On  delivery,  actual  or  constructive.  J 

(b)  When  the  goods  are  manufactured,  set  aside  from 
general  stock,  and  invoiced  to  the  purchaser. 


^2 

A  contract  of  sale  may  be  voided  by  fraud  or  breach 
of  warranty. 

9.  May  an  agent  be  orally  empowered  to  make  a  writ- 
ten contract  for  the  sale  of  land  or  to  convey  the  land 
after  sale?    Explain. 

He  may  not.  Such  contracts  would  have  to  be  in  writ- 
ing and  under  seal ;  and  an  agent  cannot  legally  execute 
a  contract  under  seal  unless  he  himself  is  so  appointed. 

10.  Define  dower.  When  does  the  right  of  dower  ac- 
crue? Is  this  right  affected  by  any  assignment  made  by 
the  husband? 

An  estate  in  dower  is  the  right  which  a  wife  has  to 
the  use  for  life  of  one-third  of  all  the  real  estate  of  which 
her  husband  was  possessed  of  an  estate  of  inheritance  at 
any  time  during  marriage. 

The  right  accrues  on  the  death  of  the  husband. 

It  is  not. 

11.  What  is  the  nature  of  the  interest  of  each  partner 
in  partnership  property?  Has  a  partner  an  exclusive 
right  to  any  part  of  such  property?  In  what  way  can 
a  partners  interest  be  ascertained  and  made  available? 

They  are  co-trustees  and  tenants  in  common. 

He  has  not. 

By  an  accounting;  realization  and  liquidation  of  the 
firm's  assets  and  liabilities ;  and  pro-rata  division  of  sur- 
plus amongst  the  partners. 

12.  May  a  corporation  buy  its  own  stock?  Explain 
fully. 


73 

J 

Not  ordinarily,  for  the  effect  woul  be  to  virtually  re- 
duce the  amount  of  the  capital.  But  the  stock  may  be 
received  in  payment  of  a  debt  due  the  corporation  by  a 
stockholder;  it  may  be  received  as  a  gift;  and  it  may  be 
purchased  out  of  its  surplus.  But  such  stock  could  not 
be  voted  on. 

13.  Explain  the  distinction  between  surcharging  an  ac- 
count and  falsifying  an  acount. 

To  "surcharge''  is  to  prove  the  omission  of  an  item 
from  an  account  which  is  before  the  court  as  complete 
(an  account  stated)  which  should  be  inserted  to  the 
credit  of  the  party  surcharging.  Leave  to  surcharge  and 
falsify  is  granted  in  preference  to  opening  an  account  (in 
case  of  an  account  stated  by  the  parties),  or  reported  by  -/ 
an  auditor,  where  the  party  obtaining  the  liberty  would 
be  excluded  by  the  account  were  it  not  granted. 

To  "falsify''  is  to  prove  that  an  item  in  an  account  be- 
fore the  court  as  complete,  which  is  inserted  to  the  debit 
of  the  party  falsifying,  should  have  been  omitted.  When 
a  bill  to  open  an  account  has  been  filed,  the  plaintiff 
is  sometimes  allowed  to  surcharge  (i.  e.,  add  an  addi- 
tional item  of  charge)  and  falsify  (i.  e.,  eliminate  an  item 
charged)  such  account.  If  anything  has  been  wrongly 
charged  he  is  at  liberty  to  show  it,  and  that  is  a  falsifica- 
tion. 


14.  Is  it  necessary  that  a  guaranty  for  the  debt  or  de- 
fault of  another  be  in  writing  and  express  the  considera- 
tion in  order  to  hold  the  guarantor  ?  Is  notice  of  non-pay- 
ment necessary  to  charge  the  guarantor  of  the  payment 
of  a  promissory  note? 


74 

The  guarantee  must  be  in  writing.  If  made  at  the  same 
time  as  the  principal  contract  the  original  consideration 
will  also  support  the  guarantee ;  but  if  made  subsequently 
to  it,  the  consideration  must  be  expressed. 

It  is  necessary  to  notify  the  guarantee  of  non-payment ; 
but  failure  to  do  so  promptly  will  not  relieve  the  guaran- 
tor from  payment. 

15.  When  does  a  proxy,  executed  by  a  member  of  a 
corporation  without  specifying  the  time  it  is  to  continue 
in  force,  become  invalid?  Must  a  proxy  holder  be  neces- 
sarily a  stock-holder?  Have  inspectors  of  election  power 
to  determine  the  genuineness  of  proxies  ? 

After  eleven  months. 

No ;  but  no  officer,  clerk,  teller,  or  bookkeeper  of  a  cor- 
y  poration  formed  under  or  subject  to  the  banking  law  may 
act  as  proxy  for  any  stockholder  at  any  meeting  of  any 
such  corporation. 

No.  If  they  are  apparently  the  acts  of  the  stockholders, 
and  regular  upon  their  face,  that  ends  the  matter  so  far 
as  the  inspectors  are  concerned. 


75 


January  190U 

1.  What  is  essential  to  the  proper  execution  of  a  deed 
conveying  land?  What  attestation  is  required?  When 
does  the  record  of  a  deed  take  effect?  How  does  a  war- 
ranty deed  differ  from  a  quit  claim  deed  ? 

It  must  be  signed,  sealed,  acknowledged,  delivered  and 
recorded. 

The  attestation  of  one  witness. 

The  moment  it  is  handed  to  the  recording  officer. 

A  quit  claim  deed  simply  releases  all  right,  title  and  in- 
terest of  the  grantor,  while  a  warranty  deed  in  addition 
carries  a  guaranty  of  title.  The  liability  upon  the  lat- 
ter covenant  only  arises  upon  actual  and  rightful  dispos- 
session of  the  grantee  by  one  having  a  better  title. 

2.  Where  a  delivery  only  is  necessary  to  complete  a 
contract  of  sale,  can  the  buyer,  by  refusing  to  receive  the 
property,  throw  the  risk  of  injury  or  loss  on  the  seller? 
What  remedy  or  remedies  has  the  seller?    Explain. 

He  cannot. 

He  may  retain  possession  of  the  goods,  and  after  giving 
notice  to  the  buyer  he  may  sell  them  in  the  usual  way 
and  recover  from  the  buyer  any  loss  which  may  happen 
upon  the  resale. 

3.  What  books  are  stock  corporations  required  by 
law  to  keep?  What  must  the  stock  book  show?  Does 
a  corporation  incur  a  penalty  by  neglecting  or  refusing 


76 

to  keep  a  stock  book?  If  so,  state  the  amount  of  the 
penalty.  Who  besides  stockholders  have  the  right  to 
inspect  and  make  extracts  from  the  stock  book? 

Proper  books  of  account  of  all  its  business  transactions 
and  a  stock  book. 

It  must  contain  the  names  of  all  the  stockholders,  al- 
phabetically arranged,  the  number  of  shares  held  by  each, 
place  of  residence,  the  date  when  they  became  owners  of 
the  stock,  and  the  amount  paid  thereon. 

It  does. 

Fifty  dollars  for  every  day  it  neglects  to  keep  one. 

Judgment  creditors. 

4.  On  the  dissolution  of  a  partnership,  what  is  the  mu- 
tual relation  of  the  partners  in  respect  to  the  partnership 
property  and  effects?  To  what  extent  does  each  partner 
continue  to  be  the  agent  of  all?  May  one  partner  main- 
tain an  action  at  law  against  another  for  what  may  be 
properly  due  him  on  partnership  account?    Explain. 

They  are  joint  tenants  and  trustees  for  themselves  and 
firm  creditors. 

Each  partner  continues  to  be  the  agent  of  all  in  settling 
up  firm  affairs,  collecting  debts  and  discharging  liabilities. 

Only  until  an  accounting,  and  the  partnership  balances 
adjusted,  either  by  voluntary  agreement  or  the  judg- 
ment of  a  court. 

5.  If,  on  the  dissolution  of  a  partnership  by  the  death  of 
a  partner,  it  happens  that  there  is  not  sufficient  property 
and  effects  to  pay  its  obligations,  what  liability,  if  any, 
will  attach  to  the  estate  of  the  deceased  partner?  State 
the  rights  of  the  deceased  partner's  individual  creditors 
and  next  of  kin  in  such  case. 


77 

In  such  a  case  the  deceased  partner's  personal  estate 
may  be  held  to  pay  firm  debts ;  but  personal  creditors  have 
preference  over  partnership  creditors. 

The  individual  creditors  are  paid  in  full  first;  then 
partnership  creditors ;  the  residue  going  to  next  of  kin. 

6.  Is  the  corporate  seal  always  necessary  in  order  to 
bind  a  corporation?  Can  a  foreign  corporation  avail 
itself  of  the  statute  of  limitations  of  the  state  of  New 
York  in  an  action  brought  in  the  New  York  courts? 
Must  a  stockholder  own  stock  for  any  particular  length 
of  time  to  enable  him  to  issue  a  valid  proxy  to  vote  at 
any  meeting  of  stockholders?  Without  any  specified 
time  being  stated  as  to  its  continuance,  how  long  will  a 
proxy  continue  in  force? 

No. 

It  cannot. 

Yes ;  at  least  ten  days  before  such  meeting. 

Eleven  months  from  the  date  of  its  execution. 

7.  What  is  (a)  a  release,  (&)  a  mutual  release?  In 
what  respect  does  a  release  differ  from  a  receipt?  Can 
a  mutual  release,  given  on  the  adjustment  of  old  accounts, 
be  disturbed?    Explain. 

(a)  A  release  is  a  contract  containing  a  relinquishment 
of  some  right  or  claim  by  some  person  in  favor  of  an- 
other. Verbal  contracts  may  be  released  by  parol.  Writ- 
ten contracts  require  a  written  release,  and  contracts  un- 
der seal  require  the  release  to  be  under  seal. 

(6)  A  mutual  release  is  a  contract  wherein  each  party 
agrees  to  release  the  other  from  all  rights,  claims,  or  de- 
mands existing  between  them. 


t 


78 

The  difference  between  a  release  and  a  receipt  is  this : 
The  former  is  a  contract  and  expresses  consideration, 
while  the  latter  is  onfy  a  memorandum  and  is  not  absolute 
proof  of  payment,  being  open  to  rebuttal  by  parol  evidence. 

A  mutual  release  given  on  the  adjustment  of  old  ac- 
counts could  be  disturbed  if  fraud  could  be  proved  or 
gross  mistake  shown. 


8.  What  is  usurious  interest?  Who  may  take  advan- 
tage of  the  usury  to  escape  liability  on  the  debt?  Can  a 
corporation  interpose  the  defense  of  usury?  Can  a  con- 
tract, legal  under  the  usury  laws  of  the  state  where  made, 
be  enforced  in  a  state  where  it  would  have  been  usurious  ? 

Usurious  interest  is  any  rate  in  excess  of  that  prescribed 
by  law.  The  rate  varies  in  different  states.  In  New  York 
it  is  six  per  cent,  per  annum. 

The  borrower  or  his  representatives. 

It  cannot. 

It  can. 

9.  In  a  general  partnership  what  rule  will  govern  the 
apportionment  of  profits  and  losses  when  not  mentioned 
in  the  agreement?  If  the  partnership  agreement  merely 
provides  for  diversion  of  profits,  how  will  losses,  if  any, 
be  borne?  In  a  case  where  one  or  two  partners  was  to 
receive  three-fourths  of  the  profits,  and  there  was  no 
profit,  how  should  the  loss  be  divided?  Does  a  partner- 
ship exist  where  the  agreement  does  not  expressly  or  by 
implication  provide  for  community  in  the  losses? 

They  will  be  divided  equally. 
They  will  be  borne  equally. 
It  should  be  divided  equally. 


79 

No.  Partnerships  are  formed  to  make  profits  and  to 
share  them  in  certain  proportions. 

Community  in  the  losses  would  be  implied  from  this 
agreement. 

lo.  Within  what  time  must  a  domestic  stock  corpora- 
tion, or  a  foreign  stock  corporation  doing  business  in 
this  state,  file  its  annual  report?  Is  any  exception  made 
in  the  case  of  a  stock  corporation  doing  business  without 
the  United  States  ?  What  must  such  annual  report  show  ? 
By  whom  must  such  report  be  signed,  by  whom  verified 
by  oath  and  in  what  offices  must  the  same  be  filed  ?  What 
penalty  attaches  for  failure  to  file  such  report?  Is  it 
necessary  to  file  such  a  report  after  the  corporation  has 
passed  into  the  hands  of  a  receiver  ? 

During  the  month  of  January  as  of  January  ist. 
Yes;  it  must  be  filed  before  May  ist  as  of  January  ist. 
The  report  must  show : 

( 1 )  The  amount  of  its  capital  stock  and  the  proportion 
actually  issued. 

(2)  The  amount  of  its  debts  or  an  amount  which  they 
do  not  exceed. 

(3)  The  amount  of  its  assets  or  an  amount  which  its 
assets  at  least  equal. 

Such  report  shall  be  made  by  the  president,  or  a  vice- 
president,  or  the  treasurer,  or  a  secretary  of  the  corpora- 
tion. It  need  not  be  verified  by  oath.  It  need  only  be 
filed  in  the  office  of  the  Secretary  of  State.  Fifty  dollars 
a  day  is  the  penalty  payable  by  any  officer  who  fails  to 
make  and  file  the  report  within  ten  days  after  being  re- 
quested to  do  so  by  a  creditor  or  stockholder  of  the  cor- 
poration. 

It  is  not. 


8o 

11.  State  briefly  the  requirements  of  the  statute  of 
frauds  in  respect  to  agreements  which  by  their  terms  are 
not  to  be  performed  within  one  year  from  the  making 
thereof  and  also  in  respect  to  promises  to  answer  for  the 
debt,  default  or  miscarriage  of  another  person. 

Such  agreements  must  be  in  writing,  and  to  be  valid 
as  contracts  the  consideration  must  be  expressed. 

12.  What  should  a  bill  of  lading  contain?  By  whom 
should  it  be  signed?  As  between  the  ship-owner  and  the 
shipper,  what  is  the  character  of  the  bill  of  lading  in  re- 
spect to  the  goods  received?  May  it  be  contradicted? 
Does  the  same  character  exist  as  between  a  ship-owner 
and  an  assignee  of  the  bill  of  lading  for  value  ?  Explain. 
What  is  understood  by  "lay  days,"  "demurrage"? 

It  should  contain  the  name  of  the  consignor,  the  con- 
signee, the  master,  the  place  of  departure,  the  destination, 
the  rate  of  freight,  primage  and  other  charges,  things 
shipped,  with  marks  and  number  of  same. 

It  should  be  signed  by  the  master. 

It  is  a  simple  receipt. 

It  may. 

No;  it  becomes  a  contract  and  cannot  be  contradicted. 

"Lay-days"  are  the  number  of  days  after  the  arrival 
of  the  ship  at  her  port  in  which  she  may  receive  or  deliver 
cargo. 

By  "demurrage"  is  meant  compensation  for  any  delay 
beyond  the  stipulated  lay-days. 

13.  What  is  the  legal  relation  between  a  broker  and  his 
principal,  where  the  broker  is  employed  to  purchase  stock 
and  hold  it  for  his  principal  on  a  deposit  being  made 
with  him  of  a  part  of  the  price?    Explain. 


8i 

The  legal  relationship  is  that  of  pledgor  and  pledgee. 
The  broker  takes  his  principal's  "margin''  and  loans  the 
balance  requisite  to  purchase  the  stock,  which  he  holds  as 
security  for  his  advance.  In  other  words,  the  stock  is 
^'pledged"  with  him. 

14.  Compare  co-ownership  and  partnership,  and  state 
four  important  grounds  on  which  they  differ. 

CO-OWNERSHIP. 

Not  necessarily  the  result  of  agreement. 

Does  not  necessitate  a  community  of  profits  and  losses. 

Either  owner  can  transfer  his  interest  so  as  to  put  an- 
other person  in  the  same  position  as  regards  others  as  he 
himself  occupies. 

Co-owners  are  not  co-agents. 

PARTNERSHIP. 

Is  the  result,  necessarily ^  of  agreement. 
Necessitates  a  community  of  profits  and  losses. 
The  assignment  of  a  partner's  interests  effect  an  imme- 
diate dissolution  of  the  partnership. 
Partners  are  co-agents. 

15.  Should  the  proceeds  arising  from  a  mortgage,  lease 
or  sale  of  real  property  under  a  surrogate's  order  for  the 
payment  of  debts  and  funeral  expenses  be  included  by 
an  executor  in  his  account  of  proceedings?    Explain. 

No;  but  they  must  be  paid  into  the  surrogate's  court 
by  the  executor,  and  for  that  purpose  he  should  pay  them 
to  the  county  treasurer  to  the  credit  of  the  special  pro- 
ceeding, to  be  distributed  subject  to  the  direction  of  the 
surrogate's  court. 


-^ 


82 


3une  190U 

I.  What  does  the  term  certificate  of  incorporation  in- 
clude? By  whom  must  a  certificate  of  incorporation  be 
executed?  State  the  requirements  for  filing  and  record- 
ing such  a  certificate.  May  a  corporation  exercise  any 
corporate  privileges  before  paying  the  organization  tax 
and  fees  for  filing? 

The  certificate  of  incorporation  includes: 
(i)   The  name  of  the  proposed  corporation. 

(2)  The  purpose  or  purposes  for  which  it  is  to  be 
formed. 

(3)  The  amount  of  the  capital  stock,  and  if  any  por- 
tion thereof  be  preferred  stock,  the  preferences  thereof. 

(4)  The  number  of  shares  of  which  the  capital  stock 
shall  consist  (each  of  which  shall  not  be  less  than  five  nor 
more  than  one  hundred  dollars),  and  the  amount  of  capi- 
tal (not  less  than  five  hundred  dollars),  with  which  the 
said  corporation  will  begin  business. 

(5)  The  city,  village  or  town  in  which  its  principal 
buisness  is  to  be  located. 

(6)  Its  duration. 

(7)  The  number  of  its  directors  (not  less  than  three). 

(8)  The  names  and  post-office  addresses  of  the  direc- 
tors for  the  first  year. 

(9)  The  names  and  post-office  addresses  of  the  sub- 
scribers of  the  certificate,  and  a  statement  of  the  number 
of  shares  of  stock  which  each  agrees  to  take  in  the  cor- 
poration. 


83 

It  must  be  executed  by  the  incorporators.  Prior  to 
filing  and  recording  the  organization  tax  of  one-twentieth 
of  one  per  cent,  upon  the  authorized  capital  stock  of  the 
corporation  must  be  paid  to  the  State  Treasurer ;  ten  dol- 
lars for  filing  and  fifteen  cents  per  folio  for  recording 
to  the  Secretary  of  State. 

It  may  not. 

2.  State  briefly  what  matters  should  be  specified  by 
articles  of  copartnership.  In  the  absence  of  any  agree- 
ment, how  are  losses  and  gains  to  be  shared?  How  are 
firm  assets  to  be  applied  when  there  are  both  individual 
creditors  and  creditors  of  the  firm? 

The  names  of  the  partners  should  be  stated  and  the 
date  of  the  commencement  and  the  duration  of  the  part- 
nership inserted.  The  amount  of  capital  to  be  contrib- 
uted by  each  should  be  specified,  the  maximum  amount 
to  be  withdrawn  by  each,  and  the  proportion  in  which 
profits  and  losses  are  to  be  divided. 

Equally. 

Firm  creditors  come  first;  then  individual  creditors. 

3.  Does  the  admission  of  a  new  member  terminate  the 
former  partnership  and  create  a  new  one  in  law?  Is  it 
the  same  in  practice?  Is  a  new  partner  necessarily  liable 
to  creditors  of  the  old  firm  by  any  contract  which  he  may 
make  with  the  members  of  the  old  firm  to  assume  the 
old  debts  and  be  liable  for  them  the  same  as  the  other 
members.    Explain  in  each  case. 

It  does,  because  a  new  contract  is  necessary. 
It  is  not. 

He  is  if  the  creditors  are  cognizant  of  and  assent  to  the 
agreement  and  the  retiring  partner  is  relieved  from  lia- 


84 

bility;  but  if  they  are  not  party  to  the  agreement,  the 
retiring  partner  can  still  be  held  if  the  new  partner  fails 
to  pay. 

4.  What  is  negotiable  paper?  What  are  the  essentials 
which  give  to  such  contracts  their  peculiar  privileges? 
Give  the  names  of  the  most  common  kinds  of  negotiable 
paper.    What  words  are  required  to  give  negotiability  ? 

By  negotiable  paper  is  meant  written  evidence  of  debt 
which  may  be  transferred  by  indorsement  or  delivery, 
giving  the  holder  the  full  right  to  sue  and  collect  it. 

(i)  The  fact  that  in  the  hands  of  an  honest  purchaser 
the  paper  can  be  collected,  whether  it  was  binding  in  the 
hands  of  the  original  holder  or  not. 

(2)  The  fact  that  it  is  payable  absolutely  in  money  at 
a  designated  time. 

There  are  three  general  kinds  of  negotiable  paper: 
Promissory  notes,  bills  of  exchange  or  drafts,  and  checks. 

"Pay  to  A  B  or  order,"  or  "Pay  to  the  order  of  A  B," 
or  "Pay  to  A  B  or  bearer,"  or  "Pay  to  bearer." 

5.  State  briefly  the  duty  of  the  executor  of  a  deceased 
partner,  as  to  the  continuance  of  the  business  in  which 
the  testator  was  engaged. 

If  the  testator's  will  so  directs  and  the  surviving  part- 
ners assent,  the  executor  may  become  a  partner  and  con- 
tinue the  business ;  if  not,  he  has  nothing  to  do  with  the 
continuance  of  the  business.  His  duty  is  to  ascertain  the 
amount  of  the  testator's  interest  as  soon  as  possible  from 
surviving  partners,  and  collect  the  amount  due  him  for 
same. 


85 

6.  In  respect  to  ownership  of  property  what  is  under- 
stood by  (a)  joint  tenancy,  (b)  tenancy  in  common, 
(c)  tenancy  in  severalty?  What  peculiarity  attaches  to 
a  joint  tenancy  that  does  not  exist  in  a  tenancy  in  com- 
mon ?  On  the  death  of  a  tenant  in  common  to  whom  does 
his  share  pass  ? 

Joint  tenancy  is  the  estate  which  subsists  between  sev- 
eral persons  in  any  subject  of  property  by  purchase  or 
grant ;  never  by  inheritance. 

Tenancy  in  common  may  exist  from  grant,  purchase 
or  inheritance. 

When  real  property  is  conveyed  or  transferred  by  deed 
or  will  to  one  person,  he  is  said  to  be  a  tenant  in  sever- 
alty. 

The  peculiarity  attaching  to  a  joint  tenancy  that  does 
not  exist  in  a  tenancy  in  common  is  "the  right  of  sur- 
vivorship" :  that  is,  upon  the  death  of  one  of  the  tenants 
his  share  and  interest  pass  to  the  surviving  tenant  or  ten- 
ants. On  the  death  of  a  tenant  in  common  his  share 
passes.to  his  heirs.  It  is  also  to  be  noted  that  dower  at- 
tached to  the  interest  of  a  tenant  in  common,  but  not  to 
that  of  a  joint  tenancy. 

7.  Where  a  mortgage  of  goods  and  chattels  is  given 
unaccompanied  by  an  actual  change  of  possession  of  the 
property  mortgaged,  what  is  necessary  to  give  it  validity 
as  against  creditors  of  the  mortgagor  or  as  against  sub- 
sequent purchasers  and  mortgages  in  good  faith  ?  When 
does  such  a  mortgage  cease  to  be  valid  as  against  cred- 
itors of  the  person  making  the  same?  What  steps  are 
necessary  to  give  it  new  life  and  validity? 

It  should  be  recorded. 

After  one  year. 

It  must  be  re-recorded. 


86 

8  What  constitutes  agency?  How  is  the  authority  of 
an  agent  acquired?  Distinguish  between  general  agents 
and  special  agents.  Is  the  authority  of  a  general  agent 
unlimited  ?  To  what  extent  is  the  principal  bound  by  the 
acts  of  his  agent  ?    Mention  three  classes  of  agents. 

Agency  is  the  employment  of  one  person  (the  agent) 
by  another  (the  principal)  to  do  some  act  or  acts  for  his 
benefit  or  account. 

The  authority  of  an  agent  is  acquired  from  his  principal 
by  appointment  by  letter,  orally,  or  in  writing  under  seal. 

A  general  agent  is  one  appointed  to  do  acts  of  a  class, 
while  a  special  agent  is  appointed  to  perform  specific  acts. 

No;  it  is  limited  by  the  terms  of  his  contract  with  his 
principal  and  the  usages  and  customs  of  a  general  agent 
in  that  particular  line  of  business. 

He  is  bound  by  all  acts  authorized  by  contract  and  by 
all  that  are  customarily  performed  by  a  general  agent  in 
his  particular  line  of  business. 

Factors,  brokers,  attorneys  in  fact  and  at  law. 

9.  What  remedies  has  the  pledgee  of  shares  of  stock 
as  collateral  security  for  a  debt  which  is  overdue  and  un- 
paid? 

He  may  sell  the  collateral  and  recoup  himself.  If  pro- 
ceeds of  sale  are  insufficient,  he  can  maintain  an  action 
at  law  for  the  balance. 


10.  Define  real  property,  personal  property.  What  is 
understood  by  (a)  things  in  possession,  {h)  choses  in 
action?  To  what  class  do  accounts,  promissory  notes 
and  all  forms  of  indebtedness  belong? 


87 

Real  property  may  be  defined  as  that  kind  of  property 
the  ownership  in  which  at  death  will  by  law  become  vested 
in  one's  heirs  and  not  in  one's  personal  representative, 
i.  e.,  administrator  or  executor.  Personal  property  is  all 
other. 

By  (a)  things  in  possession  is  meant  any  property  of 
which  one  has  actual  possession.  By  (&)  choses  in  action 
is  meant  any  claims  upon  which  an  action  at  law  may  be 
maintained. 

Accounts,  promissory  notes,  and  all  forms  of  indebted- 
ness belong  to  choses  in  action. 

11.  What  is  understood  by  the  expression  intermediate 
account?  When  may  an  executor  or  administrator  vol- 
untarily file  in  the  surrogate's  court  an  intermediate  ac- 
count? What  is  a  compulsory  intermediate  account? 
When  is  an  account  said  to  be  judicially  settled? 

It  is  an  account  rendered  by  an  executor  intended  to 
disclose  the  condition  of  an  estate  at  any  time  prior  to 
the  final  accounting.  It  is  not  made  the  subject  of  ju- 
dicial settlement. 

At  any  time. 

A  compulsory  intermediate  account  is  one  made  by 
order  of  the  surrogate  upon  application  of  certain  parties 
on  the  happening  of  certain  events. 

An  account  is  said  to  be  judicially  settled  when  a  de- 
cre  has  issued  from  the  surrogate's  court  signifying 
that  the  account  as  rendered  is  made  conclusive  upon  the 
parties  in  interest. 

12.  Where  a  fund  is  directed  to  be  invested  and  the  in- 
terest, dividends  and  income  applied  to  the  use  of  the 
beneficiary  for  life,  does  a  profit  realized  on  the  sale  of 


< 


stock  in  which  a  portion  of  such  fund  is  invested  belong 
to  the  Hfe  tenant  as  income  or  to  the  body  of  the  estate? 
State  the  general  rules  of  law  which  govern. 

To  the  Principal  (4  Tucker,  180). 

"The  outlook  of  all  the  cases  seems  to  be  that  disre- 
garding forms  the  court  will  treat  anything  in  the  nature 
of  a  premium,  that  is  to  say  an  appreciation  in  the  value  of 
the  capital,  as  capital,  and  anything  that  is  interest, 
income  or  proceeds,  no  matter  how  extraordinary  or  un- 
usual it  may  be,  as  belonging  to  the  life  tenant''  (5  Redf. 
121). 

13.  What  is  understood  by  the  term  good  will  of  a 
business?  Is  the  good  will  of  a  business  a  recognized 
asset?    Explain.    How  is  good  will  generally  valued? 

By  good  will  is  meant  the  capitalized  value  of  the  net 
earnings  of  a  business  for  a  term  of  years  based  upon  the 
assumption  that  the  old  customers  will  resort  to  the  old 
place. 

It  is ;  because  in  addition  to  the  value  of  the  actual  capi- 
tal (i.  e.,  the  excess  of  assets  over  liabilities  in  a  business) 
there  is  to  be  taken  into  consideration  the  earning  capacity 
of  an  undertaking.  Where  profits  are  large  this  is  a 
very  valuable  asset. 

Good  will  is  generally  valued  by  taking  the  average 
net  earnings  of  a  business  for  a  term  of  years  and  taking 
from  three  to  ten  years  of  this  amount  as  its  worth. 


14.  State  the  rule  of  law  as  to  time  of  maturity  of 
negotiable  instruments.  Mention  any  exception  to  the 
general  rule. 


89 

All  negotiable  instruments  must  mature  on  a  certain 
date,  or  on  a  stated  day  after  a  given  date. 

Notes  payable  on  demand  are  an  apparent  exception, 
but  the  date  can  be  made  certain  by  making  demand. 

15.  What  is  understood  by  submission  to  arbitration? 
What  may  be  submitted  for  arbitration?  In  what  man- 
ner may  the  submission  to  arbitration  be  made?  Gen- 
erally, can  a  member  of  a  partnership  by  a  submission 
bind  his  partners  to  an  award  made  in  pursuance  to  it? 
Explain. 

An  agreement  to  submit  a  disputed  claim  to  the  judg- 
ment of  a  third  party,  and  to  be  bound  by  his  decision. 

Any  matter  in  wfeidi  dispute  which  the  parties  at  vari- 
ance consent  to  refer  to  the  judgment  of  a  third  party. 

The  parties  at  variance  agree  upon  a  third  party  to  act 
as  arbitrator,  or  each  selects  some  one  to  represent  him- 
self on  the  understanding  that  they  (the  parties  selected) 
are  to  choose  and  decide  on  another  party  to  act  as  arbi- 
trator. The  matter  to  be  arbitrated  is  reduced  to  writing 
and  a  contract  drawn  up  wherein  each  disputant  agrees 
to  be  bound  by  the  arbitrator's  decision. 

He  can ;  because  the  award  having  been  given  and  sub- 
mission being  compulsory,  he  has  power  as  an  agent  to 
bind  his  partners. 


90 


January?  1902^ 

1.  What  is  required  of  a  corporation  as  to  (a)  number 
of  incorporators,  (b)  number  of  directors,  (c)  capital 
to  be  paid  in,  (d)  books  to  be  kept?  Define  subscriber, 
incorporator,  stockholder. 

(a)  Not  less  than  three. 

(b)  Not  less  than  three. 

(c)  Not  less  than  five  hundred  dollars  to  start,  and 
fifty  per  cent,  of  the  whole  capital  stock  must  be  paid  in 
within  one  year. 

(d)  Proper  books  of  account,  and  a  stock-book. 
Subscriber :    One  who  agrees  to  take  and  pay  for  a  cer- 
tain number  of  shares. 

Incorporator:     One  who  as  such  signs  the  articles  of 
incorporation. 

Stockholder :  One  who  own  a  certain  number  of  shares 
and  whose  name  appears  in  the  stockbook. 

2.  What  is  meant  by  accommodation  paper  ?  What  are 
the  rights  and  liabilities  of  parties  to  accommodation 
paper  ? 

Accommodation  paper  is  so  called  because  one  party 
accommodates  the  other  with  the  loan  of  his  credit.  Sup- 
pose that  B  is  short  of  funds  and  of  credit  at  the  bank. 
He  goes  to  his  friend  A,  who  is  also  short  of  funds  but 
long  of  credit  at  the  bank,  and  asks  him  for  his  promis- 
sory note  for  the  sum  he  needs,  payable  at  the  time  when 


91 

he  thinks  he  will  be  able  to  pay  the  note.  A  makes  out 
the  note  payable  to  B.  B  takes  the  note  to  the  bank  and 
discounts  it.  B  cannot  collect  direct  from  A  because  there 
was  no  consideration ;  but  if  B  fails  to  pay,  the  bank  can 
make  A  do  so. 

In  the  above  case  if  B  does  not  pay  A  is  liable.  If  A 
pays  on  B's  default  he  can  sue  B  for  the  amount. 

3.  State  the  rule  of  law  as  to  what  shall  be  deemed 
fixtures,  (a)  as  between  the  seller  and  the  buyer  of  real 
estate,  (5)  as  between  the  landlord  and  tenant. 

(a)  "Whatever  is  applied  to  the  soil  belongs  to  the 
soil."  A  building  with  all  its  appurtenances  is  a  fixture. 
The  rule  is  that  a  sale  of  real  estate  carries  with  it  all 
fixtures  unless  they  are  expressly  reserved  by  the  vendor. 

(b)  A  tenant  may  remove  things  that  he  has  annexed 
to  land  or  buildings  unless  the  same  are  built  or  fixed  into 
the  wall  of  a  building  so  as  to  be  essential  to  its  support. 
The  rule  is  that  a  tenant  may  remove  any  fixtures  he  has 
put  in  provided  the  premises  are  not  left  in  a  worse  con- 
dition than  when  he  took  posession.  He  must  remove 
them  before  his  tenancy  expires,  or  he  will  be  held  to 
have  waived  his  right. 

4.  May  one  partner  without  the  knowledge  of  his 
copartners  make  a  general  assignment  of  partnership 
property  for  benefit  of  creditors  ?    Explain  fully. 

He  may  not.  He  may  assign  his  own  interest,  which 
would  work  a  dissolution  of  the  partnership.  As  to  the 
firm  property,  he  is  a  co-trustee  and  tenant  in  common, 
and  joint  action  is  necessary  to  make  a  general  assign- 
ment. 


92 

5-  In  case  of  an  agreement  to  prosecute  a  business  and 
divide  the  profits  (no  mention  of  losses  being  made) 
would  a  partnership  exist?  How  would  the  losses,  if 
any,  be  borne  ?  In  case  A  promises  to  give  B  as  compen- 
sation for  services  a  portion  of  the  profits  of  his  business, 
without  liability  on  B's  part  for  losses,  is  there  a  partner- 
ship ?     Explain. 

It  would.  Partnership  results  from  an  agreement  to 
share  profits.    This  implies  sharing  of  losses  also. 

In  this  case  the  losses  would  be  borne  equally. 

No;  B  shares  not  as  a  partner  who  contributes  to  the 
capital,  but  in  lieu  of  salary  for  services  rendered. 

6.  May  the  board  of  directors  of  a  certain  corporation 
delegate  its  authority  to  agents  or  to  a  quorum  composed 
of  less  than  a  majority  of  its  members?  May  a  director 
vote  by  proxy  at  a  meeting  of  the  board  of  directors? 
Is  a  director  or  stockholder  of  a  corporation  chargeable 
with  actual  knowledge  of  its  business  merely  because  he 
is  a  director  or  stockholder?     Give  reasons  in  each  case. 

Yes. 

He  may  not. 

A  director  is  so  chargable,  because  he  is  really  a  trustee 
for  the  stockholders  and  is  entrusted  by  them  with  the 
business  management  of  the  corporation.  A  stockholder 
as  such  is  not  so  chargable,  because  he  has  no  voice  in 
the  management  of  affairs. 


7.  What  is  understood  by  the  acknowledgment  to  a 
deed?  State  the  object  of  such  acknowledgment.  Is  it 
an  essential  part  of  the  instrument?  Is  the  recording  of 
a  deed  not  properly  acknowledged  good  against  creditors 
and  subsequent  purchasers  without  notice? 


93 

A  statement  made  to  a  proper  officer  by  the  parties 
whose  names  are  signed  to  the  deed,  and  written  by  the 
officers  on  the  deed,  that  they  voluntarily  signed  the  in- 
strument. 

To  enable  the  deed  to  be  recorded. 

It  is  not. 

No. 

8.  An  estate  with  a  life  tenancy  consists  in  part  of 
shares  in  a  certain  corporation  that  has  voted  to  increase 
its  capital  stock.  Woud  the  proceeds  of  a  sale  of  the 
right  to  subscribe  for  the  estate's  quota  of  this  new  issue 
go  to  the  life  tenant  or  to  the  body  of  the  estate?  Ex- 
plain. 

Options  or  privileges  given  to  subscribe  for  stock  and 
bonds  should  inure  to  the  benefit  of  the  remainder  man 
and  go  as  principal.  The  right  to  subscribe  belonged  to 
the  Trust  Estate,  and  accrued  upon  condition  that  the 
Estate  chose  to  pay  for  or  purchase  the  bonds  or  stock. 
If  the  option  is  accepted  the  purchase  operates  to  increase 
the  capital  or  change  its  manner  of  investment. 

9.  What  is  a  bond  ?  What  does  the  ordinary  bond  used 
in  business  acknowledge?  What  is  the  sum  specified  in 
the  obligatory  clause  of  the  bond  called?  Is  it  regarded 
as  the  measure  of  damage  which  may  be  collected  on  a 
default  in  the  condition?    Explain. 

A  bond  is  an  obligation  in  writing,  under  seal,  which 
may  be  either  single,  as  where  the  obligor  binds  or  obliges 
himself,  his  heirs,  executors  and  admmistrators  to  pay  a 
certain  sum  of  money  to  another  on  a  day  named ;  or  con- 
ditional, that  is  if  the  obligor  does  some  particular  act, 


94 

the  obligation  shall  be  void,  or  else  remain  in  full  force 
and  effect. 

That  one  party  obliges  himself  to  pay  to  another  a  cer- 
tain sum  of  money  on  certain  expressed  conditions. 

It  is  called  the  principal. 

It  is  not ;  the  penalty  is  twice  the  sum  of  the  principal, 
and  that  is  usually  the  measure  of  the  damage,  which  may 
include  interest,  costs,  etc. 

ID.  In  what  manner  should  a  mortgage  of  real  estate 
be  executed?  What  certificate  should  be  affixed  to  a 
mortgage  to  show  that  it  has  been  properly  executed  and 
recorded  ? 

A  mortgage  on  real  estate  is  customarily  given  as  col- 
lateral security  for  the  payment  of  a  bond.  It  is  in  form 
a  conveyance  or  deed  of  real  estate  upon  condition,  to 
become  void  (the  defeasance  clause)  upon  performance 
of  the  condition,  and  to  become  absolute  upon  default  in 
performance  of  the  condition. 

To  be  valid  it  must  conform  to  the  statute  of  frauds, 
and  it  must  be  signed,  sealed,  executed  with  all  the  for- 
mality of  deeds,  and  must  be  delivered.  It  should  also  be 
properly  acknowledged  and  recorded. 

The  certificate  of  the  record  clerk  of  the  register  of 
deeds. 

II.  State  the  rule  (in  the  absence  of  any  special  stipu- 
lation) for  computing  interest  on  a  contract  where  pay- 
ments have  been  made  from  time  to  time. 

The  question  is  indefinite.  In  order  to  answer  it  intel- 
ligently the  specific  terms  of  some  contract  should  be 
cited. 


95 

The  rule  is  first  to  apply  the  payments  to  the  discharge 
of  the  accrued  interest.  When  the  payments  exceed  the 
accrued  interest  then  after  applying  sufficient  to  discharge 
it,  to  apply  the  balance  as  a  payment  upon  the  principal. 
In  other  words,  the  old  United  States  rule  of  partial  pay- 
ments covers  in  such  cases. 

12.  After  the  dissolution  of  the  firm  of  A  and  B,  B 
conveys  by  indorsement  to  C  a  note  held  by  the  firm. 
What  rights  has  C  against  the  firm? 

Having  given  proper  notice  to  B  of  the  non-payment 
of  the  note,  he  can  sue  A  and  B  severally  for  the  amount 
due,  as  notice  to  any  one  partner  is  notice  to  the  firm 
even  though  there  has  been  a  dissolution. 

13.  Explain  the  nature  and  effect  of  an  account  stated. 
May  one  recover  on  an  account  stated  on  proof  of  the  ad- 
mission of  a  general  balance,  without  proving  the  items 
of  the  account?  When  does  the  right  of  action  for  the 
balance  arise? 

An  account  stated  is  an  agreed  balance  of  accounts 
which  has  been  examined  and  accepted  by  the  parties 
to  it.  It  is  in  the  nature  of  a  new  promise,  and  is  con- 
clusive as  to  the  liability  of  the  parties  with  reference 
to  the  transactions  included  in  it,  except  in  cases  of  fraud 
or  manifest  error. 

Yes.  It  is  not  usually  necessary  to  prove  the  items 
of  the  account. 

(i)  Within  a  reasonable  time  of  the  rendering  of  the 
account  and  its  correctness  being  assumed  by  implication, 
i.  e.,  the  silence  of  the  party  to  whom  rendered.  (2)  From 


96 

the  date  of  the  actual  acknowledgment  of  the  correctness 
of  the  amount  of  the  balance  shown  in  the  account. 

14.  What  is  understood  by  carrier's  lien?  When  is 
freight  considered  as  earned  by  a  carrier?  State  the 
remedy  of  the  carrier  in  case  freight  is  not  paid  when 
earned.  Does  the  carrier  waive  his  right  of  lien  by  de- 
livery of  goods  to  the  consignee  before  payment  of 
freight  ?    On  what  conditions  only  may  a  lien  be  retained  ? 

The  right  to  retain  possession  of  goods  as  security  for 
freight  charges  thereon. 

When  the  goods  have  been  transported  to  their  destin- 
ation and  the  consignee  notified  of  same. 

The  remedy  is,  after  proper  notice  and  the  expiration 
of  a  certain  period  of  time,  for  the  carrier  to  sell  the  goods 
at  public  auction  and  apply  the  proceeds  to  the  payment 
of  the  freight,  storage  charges,  and  the  expenses  of  the 
sale. 

He  does. 

The  retention  of  the  goods. 

15.  May  a  person  enter  into  a  contract  under  any  name 
he  may  choose  to  assume  ?    Explain. 

He  may,  provided  his  identity  is  not  concealed,  and 
provided  the  name  is  not  used  with  intent  to  defraud. 

A  person  may  ordinarily  trade  under  any  name  he 
chooses,  provided  he  registers  same  together  with  his 
real  name  as  provided  for  by  law. 


97 


3unc  1902* 

I.  As  against  the  maker  of  a  promissory  note  payable 
on  demand  with  interest,  when  does  the  statute  of  limita- 
tions begin  to  run?    What  is  the  object  of  this  statute? 

From  the  date  of  the  note,  or  if  interest  is  paid  from 
time  to  time,  from  the  date  of  the  last  payment.  The  ob- 
ject of  the  statute  of  limitations  is  to  compel  people  to 
collect  their  debts  or  commence  action  at  law  for  the  re- 
covery of  same  within  a  reasonable  time  of  their  incur- 
rence. The  older  a  claim  gets  the  more  difficult  is  it  to 
get  evidence  to  support  it  and  to  defend  against  it.  The 
possibility  of  the  introduction  of  fraudulent  claims  and 
of  fraudulent  defences  is  by  this  statute  greatly  reduced. 


2.  Is  one  who  is  a  depositing  and  check-drawing  cus- 
tomer of  a  bank  under  obligation  to  verify  the  correctness 
of  the  balance  shown  by  his  passbook  and  returned  vouch- 
ers ?    Explain. 


He  is;  for  if  owing  to  his  neglect  to  do  this  it  should 
happen  that  his  signature  had  been  forged  to  checks,  and 
money  obtained  thereon  from  the  bank  separately,  the 
bank  would  be  relieved  from  liability,  as  the  common 
carrier  would  be  held  guilty  of  contributory  negligence. 
The  customer  would  be  "estopped"  because  of  his  negli- 
gence. 


98 

3-  What  is  meant  by  the  capital  of  a  partnership?  Is 
the  capital  the  same  as  its  actual  assets?  Is  the  capital 
of  each  partner  necessarily  the  amount  due  to  him  from 
the  firm?     Explain. 

By  capital  is  primarily  meant  the  amount  of  money, 
or  the  value  of  the  goods,  or  skill  invested  in  a  concern 
by  the  partners.  But  it  must  be  borne  in  mind  that  cap- 
ital is  of  fluctuating  value,  increasing  or  diminishing  in 
worth  from  day  to  day  according  as  profits  or  losses  are 
made. 

It  is  not;  it  is  the  excess  value  of  the  assets  over  the 
liabilities  of  a  business. 

It  is  not;  because,  as  before  stated,  where  profits  and 
losses  are  adjusted,  the  capital  of  each  partner  may  be 
greater  or  less  than  the  amount  shown  before  the  books 
are  "closed.''  Again,  even  after  the  books  are  ''closed" 
the  capital  of  partners  shown  in  the  balance  sheet  is  not 
necessarily  the  amount  due  to  them,  because  in  the  event 
of  a  dissolution  of  the  partnership  from  any  cause  the 
assets  would  first  have  to  be  realized  and  all  outside  in- 
debtedness liquidated,  and  only  the  residue  would  be  due 
partners.  Assets  have  a  curious  habit  of  diminishing  in 
value  in  the  process  of  realization,  while  there  are  neces- 
sary expenses  attending  same.  Liabilities,  on  the  other 
hand,  are  awkwardly  obstinate  in  the  persistent  manner 
in  which  they  refuse  to  be  got  rid  of  at  less  than  full 
value. 

4.  Define  profits.  In  ascertaining  the  net  profit  of  a  busi- 
ness, is  it  right  to  deduct  interest  on  capital  employed? 
Under  ordinary  circumstances,  should  gains  be  treated 
as  profits  of  the  year  in  which  they  are  earned  or  the 
year  in  which  they  are  received? 


99 

Profits  are  the  net  earnings  of  a  business  available  for 
distribution  in  the  form  of  dividends,  if  a  corporation; 
or  for  capital  accretion  if  an  ordinary  firm. 

It  is  entirely  a  matter  of  agreement. 

Gains  should  be  treated  as  profits  of  the  year  in  which 
they  were  earned. 

5.  What  is  the  eflfect  of  a  judgment  recovered  against 
a  person  prior  to  his  filing  a  petition  in  voluntary  bank- 
ruptcy, in  case  he  is  adjudged  a  bankrupt? 

If  recovered  at  any  time  within  four  months  prior  to 
his  filing  a  petition,  the  judgment  will  be  dissolved  if 
proved  that  he  was  insolvent  and  that  its  enforcement 
would  work  a  preference. 

6.  If  A  contributes  one-third  and  B  two-thirds  of  the 
capital  of  a  partnership,  and  nothing  is  said  as  to  how 
the  profits  shall  be  divided,  what  proportion  should  go 
to  each? 

One  half. 

7.  Has  an  executor  a  right  ex  officio  to  examine  the 
books  of  a  partnership  in  order  to  ascertain  his  testator's 
interest  therein?  Within  what  period  can  an  executor 
compel  surviving  partners  to  pay  the  interest  of  his  tes- 
tator? 

No ;  but  he  may  examine  the  partners  to  ascertain  testa- 
tor's interest,  and  if  dissatisfied  he  may  obtain  an  order 
for  an  accounting  from  a  court  of  equity  which  would 
confer  on  him  the  right  to  examine  the  partnership  books. 

There  is  no  stated  period;  a  "reasonable"  time  is  usu- 


100 

ally  allowed.  If  dissatisfied  the  testator  may  cite  the 
partner  to  show  cause  why  the  testator's  interest  should 
not  be  paid. 

8.  State  the  method  of  taking  a  partnership  accounting 
under  a  decree  for  an  accounting  between  or  among  part- 
ners. 

The  articles  of  co-partnership  should  first  be  carefully 
examined  to  ascertain  the  amount  of  capital  to  be  contrib- 
uted by  each  and  the  proportion  of  profits  the  partners 
severally  are  entitled  to.  The  accountant  should  then  ex- 
amine the  book  of  accounts  and  satisfy  himself  that  these 
provisions  have  been  complied  with.  Next  he  should  make 
a  careful  and  exhaustive  audit  of  the  cash  receipts  and  ex- 
penditures, and  examine  the  books  to  see  that  the  profits 
stated  are  correct.  Finally  he  should  make  up  a  balance 
sheet  in  the  form  of  a  ^'statement  of  affairs,"  showing  the 
amount  due  each  partner. 

9.  Has  the  treasurer  of  a  corporation,  as  such  officer, 
any  authority  to  bind  the  corporation  by  a  contract  for 
work,  labor  and  services?  Can  the  stockholders  of  a 
business  corporation  lawfully  authorize  a  transfer  of  its 
entire  property  to  another  corporation  in  exchange  for 
the  stock  of  the  latter?    Explain. 

Not  unless  he  is  so  authorized  by  the  by-laws.  But  the 
general  rule  is  that  an  agreement  made  by  an  officer  or 
agent  of  a  corporation  who  assumes  to  act  in  its  behalf 
can  be  enforced  against  the  corporation  when  it  has  re- 
ceived the  benefit  of  the  agreement. 

Yes;  under  a  consolidation  agreement  assented  to  by 
at  least  two-thirds  of  the  stockholders. 


I^I 


10.  From  whom  must  the  appllealion 'f 6f  "a' v()kmtary 
dissolution  of  a  corporation  proceed?  Under  what  con- 
ditions may  such  application  be  made?  To  whom  should 
such  petition  be  presented? 

From  the  stockholders. 

If  the  directors  by  majority  vote  of  the  whole  board 
adopt  a  resolution  that  it  is  in  their  opinion  advisable  to 
dissolve  the  corporation,  and  the  stockholders  after  proper 
notice  and  at  a  meeting  properly  called  signify  their 
written  consent  to  same  (the  holders  of  two-thirds  in 
amount  of  the  stock  of  the  corporation ) ,  then  the  corpora- 
tion shall  file  such  consent,  attested  by  its  secretary  or 
treasurer  and  its  president  or  vice-president,  together  with 
the  names  and  addresses  of  the  directors  and  officers. 

The  petition  should  be  presented  to  the  Secretary  of 
State. 

11.  A  debtor  sends  a  check  to  his  creditor,  stating  it  to 
be  in  full  payment  of  his  account  to  date,  and  the  creditor 
retains  and  uses  the  check  but  declines  to  regard  it  as 
full  payment;  whereupon  the  debtor  demands  that  it  be 
accepted  as  such  payment  or  that  it  or  its  avails  be  re- 
turned at  once.  The  creditor  neglects  to  return  the  check 
or  its  proceeds  but  repeats  his  demand  for  a  balance 
alleged  to  be  still  due.  Is  there  an  accord  and  satisfac- 
tion?    Give  reasons  for  your  answer. 

No.  An  accord  and  satisfaction  is  a  compromise  set- 
tlement of  a  disputed  claim.  It  must  be  the  result  of 
an  agreement.  Here  there  is  none,  as  the  creditor  does 
not  agree  to  accept  less  than  the  amount  he  originally 
claimed. 

He  would  be  justified  in  using  the  avails  of  the  check 
on  which  he  would  have  a  lien. 


102 

12..  J>oea-a  dividend  on  stock,  declared  before  a  testa- 
tor's death,  but  not  payable  till  after  his  death,  become  a 
part  of  his  estate  or  does  it  belong  to  the  life  tenant  as 
income  ? 


It  becomes  a  part  of  his  estate,  as  immediately  a  divi- 
dend is  declared  the  amount  of  same  is  set  aside  from  the 
general  assets  of  the  corporation  and  belongs  to  the 
stockholders  of  record. 

13.  What  is  a  contract?  What  are  the  essentials  of 
every  contract?  State  the  general  rule  as  to  who  may 
contract.  Distinguish  between  good  consideration  and 
valuable  consideration.  Will  a  good  consideration  sup- 
port an  executory  contract  ? 

A  contract  is  agreement  between  two  or  more  compe- 
tent persons  based  upon  consideration,  to  do  or  not  to  do 
some  particular  thing. 

The  essentials  to  every  contract  are:  The  contracting 
parties  must  be  legally  competent  to  contract;  they  must 
give  their  consent ;  there  must  be  consideration,  and  there 
must  be  subject  matter,  i.  e.,  something  which  they  agree 
to  do  or  not  to  do. 

The  general  rule  as  to  who  may  contract  is  that  any 
person  is  competent  to  contract  who  has  not  been  declared 
legally  incompetent. 

By  good  consideration  is  meant  the  natural  love  and 
affection  existing  between  relatives. 

A  valuable  consideration  is  an  inducement  of  value, 
and  may  be  a  benefit  to  the  promissor  or  a  loss  or  incon- 
venience to  the  promisee. 

It  will  not.  i 


I03 

14-  Is  a  local  assessment  for  improvement  apportiona- 
ble  iDetween  life-tenant  and  remainder-man?     Explain. 

It  is  generally ;  but  it  depends  largely  on  circumstances, 
such  as  the  condition  of  the  property,  and  whether  the 
income  arising  from  same  would  be  increased  thereby. 

15.  If  a  note  is  held  by  a  bank  at  which  it  is  payable 
and  is  not  paid  when  due,  must  there  be  a  presentment 
and  demand  of  payment?  Is  the  presentation  of  a  ma- 
tured draft  to  the  drawer  for  payment  sufficient  notice 
to  him  of  non-payment  by  the  acceptor? 

No  presentment  and  demand  of  payment  are  necessary. 
The  maker  is  bound  to  have  funds  there  to  meet  it. 

It  is  not;  evidence  must  be  furnished  the  drawer  that 
the  draft  has  been  presented  for  payment,  and  that  pay- 
ment has  not  been  made.  This  evidence  is  the  notice  of 
protest  by  a  notary  public. 


I04 


d.  p*  a.  Xaw 

State  of  New  York. 

§  I  Any  citizen  of  the  United  States,  or  person  who 
has  duly  declared  his  intention  of  becoming  such  citizen, 
residing  or  having  a  place  for  the  regular  transaction  of 
business  in  the  state,  being  over  the  age  of  21  years  and 
of  good  moral  character,  and  who  shall  have  received 
from  the  regents  of  the  University  a  certificate  of  his 
qualifications  to  practice  as  a  public  expert  accountant 
as  hereinafter  provided,  shall  be  styled  and  known  as 
a  certified  public  accountant;  and  no  other  person  shall 
assume  such  title,  or  use  the  abbreviation  C.  P.  A.  or  any 
other  words,  letters  or  figures,  to  indicate  that  the  person 
using  the  same  is  such  certified  public  accountant. 

§  2  The  regents  of  the  University  shall  make  rules  for 
the  examination  of  persons  applying  for  certificates  un- 
der this  act,  and  may  appoint  a  board  of  three  examiners 
for  the  purpose,  which  board  shall,  after  the  year  1897, 
be  composed  of  certified  public  accountants.  The  regents 
shall  charge  for  examination  and  certificate  such  fee  as 
may  be  necessary  to  meet  the  actual  expenses  of  such  ex- 
aminations, and  they  shall  report  annually  their  receipts 
and  expenses  under  the  provisions  of  this  act  to  the  state 
controller,  and  pay  the  balance  of  receipts  over  expendi- 
tures to  the  state  treasurer.  The  i;egents  may  revoke 
any  such  certificate  for  sufficient  cause  after  written  no- 
tice to  the  holder  thereof  and  a  hearing  thereon. 

§  3  The  regents  may,  in  their  discretion,  waive  the 
examination  of  any  person  possessing  the  qualifications 
mentioned  in  §  i  who  shall  have  been,  for  more  than  one 
year  before  the  passage  of  this  act,  practicing  in  this  state 
on  his  own  account,  as  a  public  accountant,  and  who 


I05 

shall  apply  in  writing  for  such  certificate  within  one  year 
after  the  passage  of  this  act. 

§  4  Any  violation  of  this  act  shall  be  a  misdemeanor. 

§  5  This  act  shall  take  effect  immediately. 

Notes  on  the  law. 

1  The  use  of  the  abbreviation  C.  P.  A.  or  any  other 
words,  letters  or  figures  to  indicate  that  the  person  using 
the  same  is  a  certified  public  accountant  is  prohibited  ex- 
cept to  those  holding  regents  certified  public  accountant 
certificates. 

2  The  three  examiners  are  appointed  to  serve  for  one 
year.  Since  1897  the  board  has  been  composed  of  certi- 
fied public  accountants. 

3  Certificates  will  be  revoked  for  cause. 


io6 


C.  p.  a  Xaw 

State  of  Illinois. 

A  Bill  for  an  act  to  regulate  the  practice  of  Public  Ac- 
counting; to  establish  a  Board  of  Accountancy  for  the 
examination  of  Public  Accountants ;  to  provide  for  the 
granting  of  certificates  to  those  who  qualify  under  the 
provisions  of  this  act,  and  to  provide  a  penalty  for  any 
violations  thereof. 

§  I  (i)  Be  it  enacted  by  the  people  of  the  State  of 
Illinois  represented  in  the  General  Assembly:  That  with- 
in thirty  days  after  the  passage  of  this  act,  the  Governor 
shall  apoint,  with  the  advice  and  consent  of  the  Senate, 
a  Board  of  Accountancy,  to  consist  of  three  members  to 
be  selected  in  the  manner  hereinafter  provided,  for  the 
examination  of  persons  applying  for  certification  and  reg- 
istration under  this  act,  and  for  the  performance  of  such 
other  duties  as  may  be  hereinafter  provided. 

(2)  That  the  members  of  the  Board  of  Accountancy 
first  appointed  shall  be  selected  by  the  Governor  from  the 
names  of  public  accountants  skilled  in  the  practice  of  that 
profession,  and  actively  engaged  therein  within  the  State 
of  Illinois.  One  member  of  the  said  board  shall  hold 
office  for  the  term  of  two  years,  one  for  the  term  of  four 
years,  and  one  for  the  term  of  six  years  from  the  first 
day  of  March  next  preceding  such  first  appointment; 
and  upon  the  expiration  of  each  of  said  terms,  and  of  each 
succeeding  term,  a  member  shall  be  appointed  from 
holders  of  certificates  under  this  act. 

(3)  In  the  event  of  a  vacancy  arising,  the  Governor 
shall  appoint  a  successor  for  the  unexpired  term  of  the 
retiring  member,  from  the  holders  of  certificates  issued 
under  this  act  chosen  as  aforesaid. 


I07 

§  2  Any  citizen  of  the  United  States,  or  person  who 
has  duly  declared  his  intention  of  becoming  such  citizen, 
having  a  place  for  the  regular  transaction  of  business 
as  a  professional  accountant,  within  the  State  of  Illinois, 
being  over  the  age  of  25  years,  of  good  moral  character, 
and  who  shall  have  received  from  the  Board  of  Account- 
ancy a  certificate  of  his  qualification  to  practice  as  a  public 
accountant,  as  hereinafter  provided,  shall  be  styled  and 
known  as  a  Certified  Public  Accountant ^  and  no  other 
person  shall  assume  such  title,  or  use  the  abbreviation, 
*C.  P.  A.,"  or  any  other  words  or  letters  to  indicate  that 
the  person  using  the  same  is  a  certified  public  accountant. 

§3(1)  The  granting  of  certificates  shall  be  based  up- 
on an  examination  in  ^Theory  of  Accounts,''  "Practical 
Accounting,"  "Auditing,"  and  "Commercial  Law"  as 
affecting  accountancy,  and  such  examinations  shall  take 
place  at  Springfield  or  Chicago  as  often  as  may  be  neces- 
sary in  the  opinion  of  the  Board  of  Accountancy,  but  not 
less  frequently  than  once  a  year,  and  under  such  rules  and 
regulations  as  may  be  adopted  by  the  said  Board. 

(2)  The  time  and  place  of  holding  the  examination 
shall  be  duly  advertised  for  riot  less  than  three  consecu- 
tive days  in  one  daily  newspaper  published  in  Springfield 
and  one  published  in  Chicago,  not  less  than  thirty  days 
prior  to  the  date  of  each  examination,  and  by  letter  mailed 
not  less  than  twenty  days  before  such  examination  to  each 
person  who  may  have  applied  to  any  officer  of  said  Board 
for  information  as  to  such  examination. 

§  4  The  Board  of  Accountancy  may  in  its  discretion 
under  regulations  provided  by  its  rules,  waive  all  or  any 
part  of  the  examination  of  any  applicant  possessing  the 
qualifications  mentioned  in  §  2,  who  shall  have  had  five 
successive  years'  previous  experience  as  a  public  account- 
ant, who  shall  apply  to  the  Board  of  Accountancy  in  writ- 
ing within  one  year  after  the  passage  of  this  act,  and  who 
shall  have  been  practicing  in  this  State  as  a  public  ac- 
countant on  his  own  account  for  a  period  of  not  less  than 
one  year  next  prior  to  the  passage  of  this  act ;  also  of  any 
person  who  shall  have  been  actively  in  practice  as  a  public 


io8 

accountant  for  not  less  than  five  years  next  prior  to  the 
passage  of  this  act,  outside  the  State  of  IlHnois,  who  shall 
have  passed  an  examination  equivalent,  in  the  opinion  of 
the  Board,  to  the  examination  to  be  held  under  the  pro- 
visions of  this  act. 

§5(1)  The  Board  of  Accountancy  shall  within  thirty 
days  after  their  appointment  meet  and  organize  by  elect- 
ing one  of  their  number  as  president,  and  one  of  their 
nunmber  as  secretary,  and  shall  from  time  to  time  adopt 
such  rules  and  regulations  for  their  government  as  shall 
be  necessary  and  not  contrary  to  the  provisions  of  this 
act. 

(2)  The  Board  of  Accountancy  shall  transmit  to  the 
Secretary  of  State,  all  certificates  granted  by  them,  for 
registration  in  his  office,  and  no  such  certificates  shall  be 
valid  until' they  shall  have  been  registered  as  herein  pro- 
vided, and  such  registration  shall  be  attested  on  the  face 
of  such  certificates  under  the  name  of  the  Secretary  of 
State  and  Seal  of  the  State  of  Illinois. 

§6(1)  Each  applicant  for  a  certificate  under  the  pro- 
visions of  this  act  shall  pay  to  the  secretary  of  the  Board 
of  Accountancy  at  the  time  of  filing  an  application,  a  fee 
of  Twenty-five  Dollars  ($25.00). 

(2)  Each  successful  applicant  for  a  certificate  shall 
pay  to  the  secretary  of  the  Board  of  Accountancy  a  fee 
of  One  Dollar  ($1.00),  to  be  transmitted  to  the  Secretary 
of  State,  for  the  registration  of  his  certificate,  as  provided 
for  by  this  act. 

(3)  Each  holder  of  a  certificate,  issued  under  the  pro- 
visions of  this  act,  shall  pay  to  the  secretary  of  the  Board 
of  Accountancy  on  the  first  day  of  July  of  each  year  after 
1903,  a  license  fee  of  Ten  Dollars  ($10.00)  as  shall  be 
provided  by  the  rules  of  the  Board  of  Accountancy. 

§  7  (i)  From  the  fees  collected  under  Sec.  6,  there 
shall  be  paid  all  the  expenses  incidental  to  the  meetings 
and  examinations  held  by  the  Board  of  Accountancy,  and 
the  issuance  of  certificates  and  also  the  traveling  expenses 
of  the  members  of  the  Board  while  performing  their  du- 


109 

ties  under  this  act,  including  the  compensation  and  ex- 
penses of  the  secretary. 

(2)  The  members  of  the  Board  of  Accountancy  shall 
each  be  paid  as  remuneration  for  the  time  actually  ex- 
pended upon  the  affairs  of  the  Board  an  amount  not  ex- 
ceeding Ten  Dollars  ($10.00)  per  day,  provided  that  all 
such  expenses  and  remuneration  must  be  paid  from  the 
receipts  of  the  Board,  and  no  expense  incurred  under  this 
act  shall  be  a  charge  against  the  funds  of  the  State. 

(3)  The  Board  of  Accountancy  shall  report  annually 
to  the  Governor  a  full  account  of  its  proceedings,  and 
shall  include  in  such  report  a  full  and  complete  statement 
of  all  moneys  received  and  disbursed  by  its  secretary. 

§  8  The  Board  of  Accountancy  may  revoke  any  cer- 
tificate issued  under  the  provisions  of  this  act  for  unpro- 
fessional conduct  or  other  sufficient  cause,  provided  that 
written  notice  shall  have  been  previously  mailed  to  the 
holder  of  such  certificate,  twenty  days  before  any  hearing 
thereon,  stating  the  cause  for  such  contemplated  action, 
and  appointing  a  date  for  a  full  hearing  thereof  by  the 
Board;  and  provided  further,  that  no  certificate  shall  be 
revoked  until  a  hearing  shall  have  been  had.  In  the  event 
of  the  revocation  of  a  certificate,  notification  of  such  action 
shall  be  communicated  to  the  Secretary  of  State,  who  shall 
thereupon  remove  the  name  of  the  holder  of  such  certifi- 
cate from  the  register  herein  provided  for. 

§  9  If  any  person  shall  represent  himself  to  the  public 
as  having  received  a  certificate,  as  provided  in  this  act, 
or  shall  assume  to  practice  as  a  certified  public  accountant, 
or  use  the  abbreviation,  "C.  P.  A.,"  or  any  other  words 
or  letters  to  indicate  that  the  person  using  the  same  is  a 
certified  public  accountant,  without  having  received  such 
certificate,  or  after  the  same  shall  have  been  revoked,  or 
without  having  complied  with  the  provisions  of  this  act, 
he  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof  shall  be  fined  a  sum  not  exceeding  Two 
Hundred  Dollars  $(200.00)  for  each  offense;  provided 
that  nothing  herein  contained  shall  operate  to  prevent 
a  certified  public  accountant,  who  is  the  lawful  holder  of 


no 

a  certificate  issued  in  compliance  with  the  laws  of  another 
State,  from  practicing  as  such  within  this  State,  and  styl- 
ing himself  a  certified  public  accountant,  provided  he  shall 
cause  his  certificate  to  be  registered  and  shall  pay  the  an- 
nual fee  hereinbefore  provided,  unless  such  practice  be 
temporary  only,  in  which  case  he  shall  be  allowed  to  prac- 
tice upon  the  same  terms  and  in  the  same  manner  as  cer- 
tified public  accountants  residing  in  this  State  now  are, 
or  hereafter  may  be,  admitted  to  practice  in  such  State. 


Ill 


C.  p.  U.  Xaw 

State  of  Pennsylvania. 

"An  Act  to  establish  a  board  for  the  examination  of  ac- 
countants to  provide  for  the  granting  of  certificates 
to  accountants,  and  to  provide  a  punishment  for  the 
violation  of  this  act. 

"Section  i.  Be  it  enacted  by  the  Senate  and  House 
of  Representatives  of  the  Commonwealth  of  Pennsylvania 
in  General  Assembly  met,  and  it  is  hereby  enacted  by  the 
authority  of  the  same,  that  any  citizen  of  the  United 
States  residing  or  having  an  office  for  the  regular  trans- 
action of  business  in  the  State  of  Pennsylvania,  being 
over  the  age  of  twenty-one  years,  and  of  good  moral 
character,  and  who  shall  have  received  from  the  Gov- 
ernor of  the  State  of  Pennsylvania  a  certificate  of  his 
qualification  to  practice  as  a  public  expert  accountant  as 
hereinafter  provided,  shall  be  designated  and  known  as  a 
certified  public  accountant,  and  no  other  person  shall  as- 
sume such  title  or  use  the  abbreviation  C.  P.  A.,  or  any 
other  words,  letters,  or  figures  to  indicate  that  the  person 
using  the  same  is  such  certified  public  accountant.  Every 
person  holding  such  certificate  and  every  copartnership  of 
accountants,  every  member  of  which  shall  hold  such  cer- 
tificates, may  assume  and  use  the  title  of  certified  public 
accountants,  or  the  abbreviation  thereof,  C.  P.  A.,  pro- 
vided that  no  other  person  or  copartnership  shall  use  such 
title  or  abbreviation  or  other  words,  letters,  or  figures  to 
indicate  that  the  person  or  copartnership  using  the  same 
is  such  certified  public  accountant. 

"Sec.  2.  The  Governor  of  the  State  of  Pennsylvania 
shall  appoint  a  board  of  five  examiners  for  the  examina- 
tion of  persons  applying  for  certification  under  this  act. 
Three  of  said  examiners  shall  be  public  accountants,  who 


112 

shall  have  been  in  practice  as  such  for  at  least  five  years, 
one  of  whom  shall  be  appointed  for  the  term  of  one  year, 
one  for  two  years,  and  one  for  three  years,  and,  upon  the 
expiration  of  each  of  said  terms,  an  examiner  shall  be 
appointed  for  the  term  of  three  years,  and  after  one  thous- 
and eight  hundred  and  ninety-nine  these  three  examiners 
shall  be  certified  public  accountants.  The  other  two  ex- 
aminers shall  be  practising  attorneys  in  good  standing  in 
any  of  the  courts  in  the  State  of  Pennsylvania;  one  of 
them  shall  be  appointed  for  the  term  of  one  year  and  the 
other  for  two  years,  and,  upon  the  expiration  of  each  of 
said  terms,  a  successor  shall  be  appointed  for  the  term  of 
two  years.  The  examination  of  certificates  shall  be  based 
upon  an  examination  in  commercial  law  and  general  ac- 
counting; said  examination  shall  take  place  in  Philadel- 
phia, Harrisburg,  and  Pittsburg  twice  a  year  during  the 
months  of  May  and  November  of  each  year,  under  such 
rules  and  regulations  as  may  be  adopted  by  the  board. 
The  fees  provided  by  this  act  shall  be  twenty-five  dollars 
for  each  applicant,  from  which  shall  be  paid  for  the  ex- 
penses incident  to  such  examination  for  stationery  and 
clerk  hire  a  sum  not  exceeding  two  hundred  dollars,  and  if 
any  surplus  above  said  expenses  shall  remain  at  the  end  of 
any  year  it  shall  be  paid  after  the  traveling  expenses  of 
the  board  shall  be  deducted  therefrom  into  the  treasury 
of  the  Commonwealth.  The  results  of  such  examinations 
shall  be  certified  to  the  Governor  and  filed  in  the  office  of 
the  Secretary  of  Internal  Affairs  and  kept  for  reference 
and  inspection  for  a  period  not  less  than  five  years,  the 
Governor  to  issue  the  certificates. 

"Sec.  3.  The  Governor  of  the  State  of  Pennsylvania 
may  revoke  any  such  certificate  for  sufficient  cause  upon 
the  recommendation  of  the  Board  of  Examiners,  who  shall 
have  given  written  notice  to  the  holder  thereof,  and  after 
he  has  had  a  hearing  thereon. 

"Sec.  4.  The  Board  of  Examiners  may,  in  its  discre- 
tion, waive  the  examination  of  any  person  who  shall  have 
been  for  three  years  before  the  passage  of  this  act  prac- 
ticing in  the  State  of  Pennsylvania  as  a  public  accountant, 


113 

and  who  shall  apply  in  writing  for  such  certificate  within 
one  year  after  the  passage  of  this  act. 

"Sec.  5.  If  any  person  shall  hold  himself  out  as  having 
received  the  certificate  provided  for  in  this  act,  or  shall 
assume  to  practice  thereunder  as  a  certified  public  ac- 
countant, or  use  the  initials  C.  P.  A.  without  having  re- 
ceived such  certificate,  or  after  the  same  shall  have  been 
revoked,  he  shall  be  deemed  guilty  of  misdemeanor,  and, 
on  conviction  thereof,  shall  be  sentenced  to  pay  a  fine  not 
exceeding  five  hundred  dollars." 


114 


C.  p.  a  Xaw 

State  of  Maryland. 

Section  i.  Be  it  enacted  by  the  General  Assembly  of 
Maryland,  That  any  citizen  of  the  United  States,  or  any 
person  who  has  duly  declared  his  intention  of  becoming 
such  citizen,  residing  or  having  a  place  for  the  regular 
transaction  of  business  in  the  State  of  Maryland,  being 
over  the  age  of  twenty-one  years  and  of  good  moral  char- 
acter, and  who  shall  have  received  from  the  Governor  of 
the  State  of  Maryland  a  certificate  of  his  qualification  to 
practice  as  a  public  expert  accountant,  as  hereinafter  pro- 
vided, shall  be  styled  and  known  as  a  certified  public  ac- 
countant ;  and  no  other  person  shall  assume  such  title,  or 
use  the  abbreviation  ''C.  P.  A.,"  or  any  other  words,  let- 
ters, or  figures  to  indicate  that  the  person  using  the  same 
is  such  certified  public  accountant. 

Sec.  2.  The  Governor  shall,  within  sixty  days  after 
the  passage  of  this  act,  appoint  a  board  of  four  examiners 
for  the  examination  of  persons  applying  for  certificates 
under  this  act;  two  of  said  examiners  shall  be  public 
accountants,  selected  from  a  list  of  six  names  proposed  by 
the  Maryland  Association  of  Public  Accountants,  one  of 
which  said  two  examiners  shall  hold  ofiice  for  the  term 
of  one  year,  and  one  for  the  term  of  two  years,  and  upon 
the  expiration  of  each  of  said  terms,  and  of  each  succeed- 
ing term,  an  examiner  shall  be  appointed  for  the  term  of 
two  years,  and  after  the  year  nineteen  hundred  each  suc- 
cessor to  said  two  examiners  shall  be  appointed  from  such 
persons  as  may  hold  certificates  as  Certified  Public  Ac- 
countants under  this  act.  The  other  two  of  said  board  of 
examiners  shall  be  practicing  attorneys,  in  good  standing, 
in  any  of  the  courts  of  the  State  of  Maryland;  one  of 


"5 

them  shall  hold  office  for  the  term  of  one  year,  the  other 
for  the  term  of  two  years,  and  upon  the  expiration  of  each 
of  said  terms  and  each  succeeding  term  a  successor  shall 
be  appointed  for  the  term  of  two  years,  such  successors 
to  be  practicing  attorneys,  in  good  standing,  as  herein- 
before mentioned. 

Sec.  3.  Examinations  of  persons  applying  for  certifi- 
cates under  this  act  shall  be  held  at  least  once  every  year 
and  be  conducted  according  to  such  rules  and  regulations 
as  the  said  board  of  examiners  may  adopt  for  the  purpose. 
The  results  of  such  examinations  shall  be  certified  to  the 
Governor,  and  to  all  persons  as  may  have  passed  exam- 
ination satisfactory  to  said  board  of  examiners,  and  by 
it  been  recommended,  the  Governor  shall  issue  the  cer- 
tificate mentioned  in  the  first  section  of  this  act. 

Sec.  4.  The  board  of  examiners  shall  charge  for  ex- 
amination and  certificate  such  fee  as  may  be  necessary 
to  meet  the  actual  expenses  of  such  examination  and 
issuing  of  such  certificate,  and  shall  report  annually  the 
receipts  and  expenses  under  the  provisions  of  this  act  to 
the  State  Controller,  and  the  surplus,  if  any,  of  receipts 
over  expenses  shall  be  paid  into  the  State  Treasury.  The 
Governor  may  revoke  any  certificate  issued  under  the 
provisions  of  this  act  for  sufficient  cause;  provided  writ- 
ten notice  shall  have  been  given  to  the  holder  thereof,  and 
after  he  has  had  an  opportunity  for  a  hearing  thereon. 

Sec.  5.  The  board  of  examiners  may  in  its  discretion 
waive  the  examination  of  any  person  possessing  the  quali- 
fications mentioned  in  Section  i  of  this  act,  who  shall 
have  been  at  the  time  of  the  passage  of  this  act  practicing 
in  this  State  as  a  public  accountant  on  his  own  account, 
and  who  shall  apply  in  writing  to  said  board  for  such 
certificate  within  one  year  after  the  passage  of  this  act, 
and  upon  the  recommendation  of  said  board  the  Governor 
shall  issue  said  certificate  to  such  person. 

Sec.  6.  Any  person  who  shall  violate  any  of  the  pro- 
visions of  this  act  shall  be  deemed  guilty  of  a  misde- 
meanor, and  upon  conviction  thereof  in  any  court  having 
criminal  jurisdiction  shall  be  fined  not  less  than  fifty  dol- 


ii6 

lars  nor  more  than  two  hundred  dollars,  or  be  confined 
not  more  than  six  months  in  the  county  jail,  if  the  con- 
viction takes  place  in  Baltimore  City  in  the  Baltimore 
City  Jail,  in  the  discretion  of  the  court. 

Sec.  7.     And  he  it  enacted,  That  this  Act  shall  take 
effect  from  the  date  of  its  passage. 


117 


c.  p.  a  Xaw 

State  of  California. 

Section  i.  Within  thirty  days  after  the  passage  of 
this  act  the  governor  shall  appoint  five  persons,  at  least 
three  of  whom  shall  be  competent  and  skilled  public  ac- 
countants, who  shall  have  been  in  practice  as  such  in  this 
State  for  not  less  than  five  consecutive  years,  to  constitute 
and  serve  as  a  State  Board  of  Accountancy.  The  mem- 
bers of  such  board  shall,  within  thirty  days  after  their 
appointment,  take  and  subscribe  to  the  oath  of  office  as 
prescribed  by  the  Political  Code,  and  file  the  same  with 
the  Secretary  of  State.  They  shall  hold  office  for  four 
years,  and  until  their  successors  are  appointed  and  quali- 
fied; save  and  except  that  one  of  the  members  of  the 
board  first  to  be  appointed  under  this  act  shall  hold  office 
for  one  year,  one  for  two  years,  one  for  three  years  and 
two  for  four  years.  Any  vacancies  that  may  occur,  from 
any  cause,  shall  be  filled  by  the  governor  for  the  unex- 
pired term ;  provided,  that  all  appointments  made  after  the 
first  year  must  be  made  from  the  roll  of  certificates  issued 
and  on  file  in  the  office  of  the  governor. 

Sec.  2.  The  State  Board  of  Accountancy  shall  have 
its  office  in  the  city  and  county  of  San  Francisco,  and  its 
powers  and  duties  shall  be  as  follows : 

1.  To  formulate  rules  for  the  government  of  the  board 
and  for  the  examination  of  and  granting  of  certificates 
of  qualification  to  persons  applying  therefor; 

2.  To  hold  written  examinations  of  applicants  for  such 
certificates,  at  least  semi-annually,  at  such  places  as  cir- 
cumstances and  applications  may  warrant ; 

3.  To  grant  certificates  of  qualification  to  such  appli- 
cants as  may,  upon  examination,  be  found  qualified  in 


ii8 

"theory  of  accounts,"  "practical  accounting,"  "auditing" 
and  "commercial  law,"  to  practice  as  certified  public  ac- 
countants ; 

4.  To  charge  and  collect  from  all  applicants  such  fee, 
not  exceeding  twenty-five  dollars,  as  may  be  necessary 
to  meet  the  expenses  of  examination,  issuance  of  certifi- 
cates and  conducting  its  office;  provided,  that  all  such 
expenses,  including  not  exceeding  five  dollars  per  day  for 
each  member  while  attending  the  sessions  of  the  board 
or  conducting  examinations,  must  be  paid  from  the  cur- 
rent receipts,  and  no  portion  thereof  shall  ever  be  paid 
from  the  State  treasury ; 

5.  To  require  the  annual  renewal  of  all  such  certificates, 
and  to  collect  therefor  a  renewal  fee  of  not  exceeding  one 
dollar. 

6.  To  revoke  for  cause  any  such  certificate,  after  writ- 
ten notice  to  the  holder,  and  a  hearing  being  had  thereon ; 
provided,  that  such  revocation  must  receive  the  affirmative 
vote  of  at  least  four  members  of  the  board ; 

7.  To  report  annually  to  the  Governor,  on  or  before 
the  first  day  of  December,  all  such  certificates  issued  or 
renewed,  together  with  a  detailed  statement  of  receipts 
and  disbursements ;  provided,  that  any  balance  remaining 
in  excess  of  the  expenses  incurred  may  be  retained  by  the 
board  and  used  in  defraying  the  future  expenses  thereof. 

8.  The  board  may,  in  its  discretion,  under  regulations 
provided  by  its  rules,  waive  the  examination  of  applicants 
possessing  the  qualifications  mentioned  in  section  three, 
who  shall  have  been  for  more  than  three  years  prior  to 
the  passage  of  this  act  practicing  in  this  State  as  public 
accountants  on  their  own  account,  and  who  shall,  in 
writing,  apply  for  such  certificates  within  one  year  there- 
after. 

Sec.  3.  Any  citizen  of  the  United  States,  or  any  per- 
son who  has  duly  declared  his  intention  of  becoming  such 
citizen,  residing  and  doing  business  in  this  State,  being 
over  the  age  of  twenty-one  years  and  of  good  moral  char- 
acter, may  apply  to  the  State  Board  of  Accountancy  for 
examination  under  its  rules,  and  for  the  issuance  to  him 


119 

of  a  certificate  of  qualification  to  practice  as  a  certified 
public  acountant,  and  upon  the  issuance  and  receipt  of 
such  certificate,  and  during  the  period  of  its  existence,  or 
of  any  renewal  thereof,  he  shall  be  styled  and  known  as  a 
certified  public  accountant  or  expert  of  accounts,  and  no 
other  person  shall  be  permitted  to  assume  and  use  such 
title  or  to  use  any  words,  letters  or  figures  to  indicate 
that  the  person  using  the  same  is  a  certified  public  account- 
ant. 

Sec.  4.  Any  violation  of  the  provisions  of  this  act 
shall  be  deemed  a  misdemeanor. 

Sec.  5.  This  act  shall  take  effect  from  and  after  its 
passage. 


120 


C.  p.  H.  Xaw 

State  of  Washington. 

AN  ACT 

To  create  a  state  board  of  acountancy,  and  prescribe  its 
duties  and  powers;  to  provide  for  the  examination 
of,  and  issuance  of  certificates  to  qualify  applicants, 
with  the  designation  of  certified  public  acountant,  and 
to  provide  the  penalty  for  violations  of  the  provisions 
thereof. 

Be  it  enacted  by  the  Legislature  of  the  State  of  Washing- 
ton: 

Section  i.  Within  thirty  days  after  this  act  shall 
take  eflfect,  the  Washington  association  of  public  account- 
ants shall  nominate  fifteen  reputable  and  skilled  account- 
ants, who  shall  have  been  in  practice  as  such  not  less  than 
three  consecutive  years,  from  which  the  governor  shall  ap- 
point five.  The  said  five  skilled  accountants  duly  elected 
and  appointed  shall  constitute  the  board  of  accountancy  of 
the  State  of  Washington,  and  shall  hold  office,  as  respect- 
ively designated  in  their  appointments,  for  the  term  of 
one,  two,  three,  four  and  five  years,  as  hereinafter  pro- 
vided, and  until  their  successors  have  been  duly  elected 
and  appointed.  The  members  of  such  board  shall,  within 
thirty  days  after  their  appointment,  take  and  subscribe  to 
the  oath  of  office  as  prescribed  by  the  statutes  of  the  State 
of  Washington,  and  file  the  same  with  the  secretary  of 
state.  The  certified  public  accountants  of  the  State  of 
Washington,  as  hereinafter  provided,  shall  annually  nom- 
inate five  of  their  number,  one  of  whom  the  governor  of 
the  State  of  Washington  shall  appoint  to  fill  the  vacancy 
annually  occurring  in  said  board,  such  appointment  to  be 
for  the  term  of  five  years.    In  case  of  a  vacancy  occurring 


121 

from  any  cause,  the  governor  shall  fill  the  vacancy  by 
appointing  a  certified  public  accountant  from  the  names 
last  submitted,  to  serve  as  a  member  of  the  board  for  the 
remainder  of  the  term. 

Sec.  2.  The  state  board  of  accountancy  shall  have  its 
office  at  such  place  in  the  State  of  Washington  as  shall 
be  designated  by  the  board,  and  its  powers  and  duties 
shall  be  as  follows : 

(i)  To  formulate  rules  for  the  government  of  the 
board  and  for  the  examination  of,  and  granting  of  certifi- 
cates of  qualification  to  persons  applying  therefor. 

(2)  To  hold  written  examinations  of  applicants  for 
such  certificates,  at  least  semi-annually,  at  such  places  as 
circumstances  and  applications  may  warrant. 

(3)  To  grant  certificates  of  qualification  to  such  ap- 
plicants as  may,  upon  examination,  be  found  qualified  in 
theory  of  accounts,  practical  accounting,  auditing,  and 
commerical  law,  to  practice  as  certified  public  accountants. 

(4)  To  charge  and  collect  from  all  applicants  such 
fee,  not  exceeding  twenty-five  dollars,  as  may  be  neces- 
sary to  meet  the  expenses  of  examination,  issuance  of 
certificates,  and  conducting  its  office:  Provided,  That  all 
such  expenses,  including  not  exceeding  five  dollars  per 
day  for  each  member  while  attending  the  sessions  of  the 
board  or  conducting  the  examinations,  must  be  paid  from 
the  current  receipts ;  and  no  portion  thereof  shall  ever  be 
paid  from  the  state  treasury. 

(5)  To  revoke  for  cause  such  certificates,  after  writ- 
ten notice  to  the  holder,  and  a  hearing  being  had  thereon : 
Provided,  That  such  revocation  must  receive  the  affirma- 
tive vote  of  at  least  four  members  of  the  board. 

(6)  To  report  annually  to  the  governor,  on  or  before 
the  first  day  of  January  in  each  year,  all  such  certificates 
issued  during  the  preceding  year,  together  with  a  detailed 
statement  of  receipts  and  disbursements :  Provided,  That 
any  balance  remaining  in  excess  of  the  expenses  incurred 
shall  be  transferred  to  the  common  school  fund  of  the 
State. 

(7)  The  board  may,  in  its  discretion,  under  regula- 


122 

tions  provided  by  its  rules,  waive  the  examination  of  ap- 
plicants possessing  the  qualifications  mentioned  in  sub- 
section three  of  this  section,  who  shall  have  been  for  more 
than  one  year  prior  to  the  passage  of  this  act,  residents  of 
the  State  of  Washington,  and  who  shall,  in  writing,  apply 
for  such  certificate  within  one  year  thereafter. 

(8)  Every  certified  public  accountant,  during  the  time 
he  continues  the  practice  of  his  profession  shall,  annually, 
on  such  date  as  the  board  of  accountancy  may  determine, 
pay  to  the  secretary  of  said  board  of  accountancy,  a  fee  of 
one  dollar,  in  return  for  which  payment  he  shall  receive  a 
renewal  certificate  for  one  year. 

Sec.  3.  Any  citizen  of  the  United  States,  or  any  person 
who  has  duly  declared  his  intention  of  becoming  such  citi- 
zen, residing  and  doing  business  in  the  State  of  Washing- 
ton, being  over  the  age  of  nineteen  years  and  of  good 
moral  character,  may  apply  to  the  state  board  of  account- 
ancy for  examination  under  its  rules,  and  for  the  issuance 
to  him  of  a  certificate  of  qualification  to  practice  as  a  certi- 
fied public  accountant ;  and  upon  the  issuance  and  receipt 
of  such  certificate,  and  during  the  period  of  its  existence, 
he  shall  be  styled  and  known  as  a  certified  public  account- 
ant, and  no  other  person  shall  be  permitted  to  assume  and 
use  such  title,  or  to  use  any  words,  letters  or  figures  to 
indicate  that  the  person  using  the  same  is  a  certified  pub- 
lic accountant,  or  expert  of  accounts. 

Sec.  4.  Any  person  violating  the  provisions  of  this 
act  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof  before  any  court  of  competent  jurisdic- 
tion, shall  be  punished  by  a  fine  in  any  sum  not  exceeding 
one  hundred  dollars. 

Sec.  5.  This  act  shall  take  eflfect  from  and  after  its 
passage  and  approval  by  the  governor. 


123 

II  nbei 

Account :  page 

Surcharging    73 

Falsifying    73 

Stated — Nature   of    95 

Agency : 

Definition  of  26 

General 26 

Special    26 

Limited    40 

Unlimited    40 

Arbitration 49 

Definition    of    49 

Different  from  a  Reference 49 

When  Resorted  to 50 

Assignee : 

Powers  of 23 

How  to  Qualify 23 

Resignation  of   23 

Assignment : 

General 22 

Insolvent    , 22 

Preferences  in    22 

Attorney  at  Law   43 

Attorney  in  Fact 43 

Bailments : 

Definition  of 18 

Deposit    19 

Commission  or  Mandate 19 

Hire    19 

Loan  for  Use   19 

Pledge    19 

Bill  of  Lading  24 


124 

Bills  of  Exchange:  page 

Domestic — Form  of 7 

Foreign — Form  of 7 

Bond : 

Definition  of   93 

Bottomry  Bond 24 

Bought   Note    50 

Broker    40 

Capital  Stock: 

How  Issued    11 

How  Transferred    1 1 

Common  Carrier: 

Definition  of 21 

Extent  of  Liability 21 

Security  for  Payment  of  Charges 21 

Consignment : 

Definition  of  16 

Consular  Invoice   24 

Contract : 

Definition  of 12 

Executory    ". 28 

How  Made   12 

Parol    12 

Specialty    12 

Validity  of 28 

Corporation : 

Annual  Report  53 

Contracts — How  Made 47 

Definition  of 9 

Sole    10 

Aggregate 10 

Eleemosynary 10 

Public ' 10 


^25  PAGE 

Private lo 

How  Created lo 

How  Dissolved   12 

Debt: 

Definition  of 88 

Partial  Payment  of 14 

Period  of  Limitation    14 

Escrow    68 

When  Deed  in  Takes  Effect 68 

Factor    40 

Fixtures    91 

Franchise : 

Definition  of  14 

Goodwill: 

Definition  of  1 1 

Guaranty : 

Definition  of 25 

Hearsay  Evidence 53 

Indorsements : 

Blank   63 

Qualified '. 63 

Protest  Waived 63 

Restrictive    63 

Special   63 

Indorser : 

How  Relieved  from  Liability 38 

Lien: 

General 31 

Special 31 

Mortgage : 

How  Executed 94 

Definition  of  14 

Dormant    15 


126 

Partnership :  page 

Nominal 15 

Silent   15 

Special   15 

Limited    16 

Dissolution   of    33 

Profits : 

Definition  of 99 

Promissory  Note: 

Description    5 

Endorsements  5 

Form  of    5 

Receiver : 

Definition  of 52 

Release  : 

Mutual    yy 

Respondentia  Bond  24 

Sale: 

Definition  of 16 

To   Arrive 37 

Sold  Note 50 

Stock-holders : 

Liability — Limitation  of  ii 

Rights  of    II 

Stoppage  in  Transitu : 

Rights  of  Vendor 30 

Rights  of  Vendee   30 

Ultra  Vires   12,  51 

Usury : 

Definition  of 45 

Exemptions  45 

Penalty    for    45 

Warranty    43 

Breach  of   43 


Aids  to  Accountant  Students 


BY 


FREDERICK  S.  TIPSON,  C.  P.  A. 


The  theory  of  ACCOUNTS 

PRICE,  $3.00. 

COMMERCIAL  LAW 

PRICE,  $3.00. 
To  follo\A^  at  short  intervals  : 

AUDITING, 
PRACTICAL  ACCOUNTING 

Vyese  Ma.nua.ts  contain  aU  questions  set  at  the  Nem)  York 
State  Certified  Public  Accountant  examinations  from 
December  1896,  to  June  1902 f  inclusive —  <^ith  fuU 
answers  and  explanations^ 


PUBI^ISHED   BY 

FREDERICK  S.  TIPSON,  150  Nass^LU  Street,  New  York 


Certified  Public  Accountant 

— « 

Examinations: 


FREDERICK  S.  TIPSON,  C.  P.  A., 

Fellow  of  the  American  Association 
of  Public  Accountants, 


150  NASSAU  STREET,  NEW  YORK, 


is  prepared  to  coacli  candidates  for  C.  P.  A. 
examinations,  New  York  State,  and  by  cor- 
respondence— all  States  where  C.  P.  A.  legisla- 
tion is  in  force.  Fee  for  the  full  course,  which 
includes  complete  instruction  in  all  subjects 
covered  by  the  examinations,  $ioo;  payable 
in  four   monthly  installments  of  $25  each. 


J'J-l 


THIS  BOOK  IS  DUB  ON  THB  LAST  DATB 
STAMPBD  BBLOW 

AN  INITIAL  FINE  OF  25  CENTS 

WILL  BE  ASSESSED   FOR   FAILURE  TO  RETURN 
THIS   BOOK  ON   THE  DATE  DUE.   THE  PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY    AND    TO    $1.00    ON    THE    SEVENTH     DAY 
OVERDUE. 

MAY  27  1936 

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